GENERAL 4330.4

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CHAPTER 1: GENERAL

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1-1 CLAIM TYPES.

All claims for single family mortgage insurance benefits must be

submitted on Form HUD-27011, Single Family Application for Insurance

Benefits. There are seven types of single family claims:

TYPE \# TYPE

01 Conveyance - The mortgagee obtains the property through

foreclosure or by deed-in-lieu after mortgage default

and deeds the property to HUD.

02 Assignment - The mortgagee, with HUD approval, assigns

a mortgage in default to HUD, and HUD becomes the

mortgagee.

03 Automatic Assignment Under Section 221 (g)(4) -

Mortgagees may elect to assign certain mortgages to

HUD. These mortgages must not be in default on the

20th anniversary and the election to assign must be

made before the 21st anniversary. Upon assignment, HUD

becomes the mortgagee.

04 Coinsurance - Certain FHA approved mortgages are

coinsured. The mortgagee acquires a property after

default and sells it rather than conveying or

assigning. Any loss on the sale is shared by HUD and

the mortgagee on a 90%:10% basis, respectively.

05 Supplemental Claims/Remittances - A supplemental claim

is the only tool for mailing adjustments after payment

of the initial claim has been made. Such adjustments

are subject to strict time limitations and are made

only when additional amounts are owed or due.

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Page 1-19/94

4330.4 GENERAL

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06 Claims Without Conveyance of Title - The property is

sold at foreclosure and is not conveyed to HUD.

Currently, this claim type is limited to claims

involving deficiency judgments.

07 Pre-foreclosure Sales - Under certain circumstances the

Department may provide relief to a mortgagor where the

property\'s fair market value is less than the

outstanding indebtedness. The terms of the sale and

the minimum sales price are pre-authorized by the

Department. If the sale is successful, a foreclosure

is avoided and the mortgagee may file a claim to

recover the shortage between the sales proceeds and the

total indebtedness.

Chapter 1 of this Handbook relates to procedures which are applicable

to all seven types of claims listed above. The remaining chapters

relate to specify procedures for each of these claim types.

1-2THE APPLICATION (FORM HUD-27011, SINGLE FAMILY APPLICATION FOR

INSURANCE BENEFITS)

A.Form Description. The application form consists of five parts.

The parts to be submitted vary depending on the type of claim

submission. All claim types will require submission of Parts A

and B. The supporting information required for each claim type

will vary as will the time frame requirements. The specific

requirements for each claim type are provided in detail in a

separate chapter for each claim type.

1.Part A, Initial Application. Provides the initial case

data. Part A is the first part of the claim prepared and

contains information relating to the mortgage, property,

property condition, mortgagee, payment history and the

foreclosure or assignment process.

2.Part B, Fiscal Data. Contains fiscal data consisting of

allowable expenses and accrued interest. It provides

summary information relating to receipts and disbursements

by the mortgagee which affect the amount of the insurance

claim. With the exception of conveyances, Part B is

submitted with Part A for all claim submissions. The

supporting documents (Parts C, D and E) are all prepared

prior to completing Part B.

3.Part C - Support Document. Contains itemized information

relating to disbursements for the protection and

preservation of the property.

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9/94Page 1-2

GENERAL 4330.4

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4.Part D - Support Document (Continuation 1). Contains

itemized information relating to such items as taxes, hazard

insurance premiums, MIP, foreclosure costs, etc.

5.Part E - Support Document (Continuation 2). Contains

itemized information relating to closing costs and amounts

due from and to the buyer at closing. It is used for

coinsurance claims, claims without conveyance of title

(CWCOT), Pre-Foreclosure Sales claims (PFS), and for

claiming certain (e.g., appraisal and deficiency judgment)

costs where appropriate on conveyance claims.

B.Where to Obtain Forms. Form HUD-27011 may be obtained from the

local HUD office, or if not available, copies of the forms in

Appendix 1 may be used. A computer generated form or facsimile

may be used only if it is substantially identical to the HUD form

in size and format. Any forms submitted that do not comply with

the HUD format or that are illegible or incomplete will be

returned.

C.Where to Submit Forms. To ensure good and timely receipt of the

claim, submit the claim as follows:

1.The original (not copy) of the HUD-27011 Parts A and/or B

with required attachments should be mailed to:

U.S. Department of Housing and Urban Development Office

of Mortgage Insurance Accounting and Servicing Single

Family Mortgage Insurance Claims Branch P. O. Box 23998

Washington, D.C. 20036-3998

\* If courier/express mail or registered or certified mail is

used, send the claim with required attachments to:

U.S. Department of Housing and Urban Development Single

Family Mortgage Insurance Claims Branch Systems

Management and Control Section, Room 6137

451 Seventh St., S.W.

Washington, D.C. 20410

A completed copy of a transmittal form (Appendix 25) should

accompany all Forms HUD-27011 sent by courier/express mail.

NOTE: See Par. 7-8 regarding a supplemental claim with a

payment to HUD.\*

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Page 1-39/94

4330.4 GENERAL

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2.Copies of Parts A and B and the originals of Parts C, D and

E, together with required attachments should be sent to the

local HUD office having jurisdiction over the mortgaged

property. These must be forwarded to the local HUD office

on the same date that the original Part A and Part B are

sent to Washington requesting payment. Mailing addresses

for local HUD offices can be obtained from correspondence

received from such office or by consulting local telephone

directories. Include the FHA Case Number on all

correspondence and documents sent to HUD. Detailed

instructions on claim submission requirements are provided

in Chapters 2 through 8 of this Handbook.

3.A copy of all parts of the form, schedules and attachments

must be retained in the claim file.

D.Who May Submit a Claim Application. A claim may be submitted by

either the holder or the servicer of the mortgage. It must be

signed by an official of the organization submitting the claim.

In either case the settlement check will be made payable to the

holder of the mortgage, as listed in Item 12 of the Form

HUD-27011.

HUD will not honor requests for claim payment checks to be

delivered to any entity other than the holder. The form

submitted to HUD Headquarters must bear the original signature.

E.Certification of Claim Accuracy. The mortgagee official signing

the Form HUD-27011 is certifying that all information and

statements contained in the claim are true and correct. Entering

information that is inaccurate for the purpose of avoiding an

interest curtailment or obtaining unauthorized insurance benefits

is in direct conflict with the certification that statements and

information on the claim are true and correct. HUD will

prosecute false claims and statements. Convictions may result in

criminal and/or civil penalties. Additionally HUD may refer any

cases to the mortgagee review board where evidence is found to

indicate intentional misrepresentation on a claim submission.\*

1-3 CLAIM PROCESSING.

A.Pre-Screening. Applications are pre-screened prior to processing

to determine whether certain essential data are missing or

incomplete. If any of the following discrepancies (or similar

deficiencies) are found, the unprocessed claim will be returned

to the mortgagee:

\- Invalid/incomplete case number;

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9/94Page 1-4

GENERAL 4330.4

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-Signature missing or not an original (copied or stamped

signatures are not acceptable);

\- Illegible document;

\- Missing Part B (except for conveyance claims);

\- Missing original MIC;

\- Missing original Title Approval Letter;

\- Missing title submission certifications (assignments only);

\- Missing holding mortgagee number (Part A);

\- Missing mortgagor\'s social security number; or

-Computer generated forms using unacceptable format or form

size.

The above data is essential to claim processing. Claim

submissions returned because of one or more of the above

discrepancies will not be edited for other errors. Therefore,

they will be returned a second time if additional errors are

detected.

Claims returned for correction will be considered received on the

date the final corrected form is received. This will normally

result in a loss of interest because the time limitation will be

exceeded.

B.Automated Processing. Form HUD-27011, Parts A and B, are

processed by computer at HUD Headquarters. If the information

provided on the form passes all system edits and control checks,

the system will compute and generate payment to the mortgagee.

The system edits are designed to permit prompt payment of most

claims by accepting costs encountered in routine claims. If

unusually high disbursements are reported, the claim payment will

be reduced and the mortgagee may file a supplemental claim for

the amount of the claim disallowed, with documentation to support

the amount of, and the need for, the higher payment. The advice

of payment with the initial claim reimbursement will identify

amounts and reasons for a reduced claim payment (See Appendix 2).

If other disbursements are unusually high the claim may be

returned for additional documentation.

Although a claim may be processed and paid by the computer, HUD

may, upon review, require reimbursement of any amounts which are

found to be excessive

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Page 1-59/94

4330.4 GENERAL

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or not supported by appropriate documentation (See Appendix 3,

Errors Frequently Made In Preparing Claims).

C.Payment Advice Letter. Within a few days of receipt of payment

the mortgagee will receive a letter giving detailed information

on the payment of the claim (Appendix 2).

D.Capitalized Accounting. If the mortgagee uses the

\"capitalization\" method of applying mortgage payments or any of

the several variations thereof, the Part A must be accompanied by

a worksheet showing the allocation of all mortgage payments in

accordance with the terms of the mortgage, i.e., to escrow,

interest and principal, in that order. The recomputation is

necessary for the system to accept the claim and to permit entry

of the correct due date of the last complete installment paid

(Item 8) and the unpaid loan balance (Item 17).

1-4 CLAIMS ASSISTANCE.

General questions concerning the use of the claim form (HUD-27011) may

be addressed to the local HUD office. Specific inquiries to confirm

HUD\'s receipt of claim or to request the status of a claim may be

directed to the Single Family Claims Support Service Center at (703)

235-9102.

This service center is equipped with an interactive voice response

capability. Basic claim payment data may be obtained by using a

touch-tone telephone. Enter the first five digits of the holder or

servicer number and the FHA Case Number to find out whether a claim

was paid, the amount of the payment, when it was paid, and the

mortgagee number of the payee. Up to 15 claims may be researched per

call. The option to transfer to an operator for further assistance is

also available.

The local HUD Office should be contacted concerning questions

regarding title evidence and title approval for specific cases. For

conveyances, please direct your questions to the Single Family

Property Disposition Branch. For assignments, please direct your

questions to the Single Family Loan Management Branch who will

coordinate with their Counsel\'s office depending upon the nature of

your question.

1-5 METHOD OF PAYMENT.

HUD has authority to reimburse the mortgagee for the unpaid principal

balance of the mortgage and allowable costs and advances in cash or

debentures (24 CFR 203.401).

A.Cash Payment. All claims for single family insurance benefits

(except those assigned pursuant to Section 221(g)(4)) are settled

in cash.

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9/94Page 1-6

GENERAL 4330.4 REV-1

CHG-1

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B.Debentures. Effective January 4, 1995, FHA/HUD debentures are

issued in book-entry form in the full settlement amount. They

are valid and binding obligations of the mortgage insurance fund

under which the mortgage was insured and are issued in accordance

with the regulations (24 CFR 203.400-411) in settlement of

mortgagee\'s application for insurance benefits.

Principal and interest are fully and unconditionally guaranteed

by the United States. Interest is paid semiannually on January 1

and July 1. The Federal Reserve Bank of Philadelphia is the

fiscal agent for the Treasury Department, who is HUD\'s agent, in

the issue, transfer, exchange, redemption, payment, purchase,

payment of semiannual interest and retirement of debentures.

C.Debenture Interest Payment. When the mortgage insurance claim is

paid in cash, the settlement includes the interest the claim

would have earned, as of the date such payment is made, if it had

been paid in debentures.

D.Debenture Interest Rate (General). Debenture interest rates are

established from time to time by the Secretary with the approval

of the Secretary of the Treasury. The rates from 1941 to

December 31, 1994, are shown in Appendix 4. The rate applicable

to a claim is the higher of the rate in effect on (i) the date

the mortgage was endorsed for insurance, or (ii) the date of firm

commitment, except for Direct Endorsements, Coinsured Loans and

Automatic Assignments.

E.Debenture Interest Rate (Direct Endorsement, Coinsurance

Programs). For applications involving mortgages originated under

the Single Family Direct Endorsement or Coinsurance Programs, the

debenture interest rate is the rate in effect as of the date the

mortgage was endorsed for insurance. (Appendix 4)

F. Debenture Interest Rate for Automatic Assignments. For Automatic

Assignments the rate is the \"going Federal rate\" at the date of

assignment. (Appendix 4)

\*1-6 EXTENSION OF TIME REQUIREMENTS.\*

The mortgagee is required to take specific actions or to submit

specific documents to HUD within time limits specified in the

regulations. The Secretary is authorized to establish time

limitations by Sections 211 (12 USC 1715b) and 204(a)(12 USC 1710) of

the National Housing Act. The time within which specific actions are

to be taken vary with the type of claim and are discussed in

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Page 1-7 4/95

4330.4 GENERAL

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detail in the following chapters relating to the respective claim

types. Failure to comply with the time requirements may result in a

loss of debenture interest. (24 CFR 203.402(k))

If the mortgagee cannot comply with the time requirements for a

particular action because of circumstances beyond its control, a

request should be submitted to the local HUD office for an extension

of time. The request should be made as soon as possible, but before

the time limit for that action expires. Time extension requests

should be made as follows:

A.Extension Request Format. All extension requests must be

submitted on Form HUD-50012, Mortgagee\'s Request for Extensions

of Time (See Appendix 5).

1.Oral requests for extension will not be accepted.

2.Mortgagees may submit their requests via facsimile in

emergency situations.

B.Submission of Extension Requests. The request must be submitted

to the local HUD field office having jurisdiction over the

property.

1.For conveyance claims, (unless directed otherwise by the

local office) requests to extend the time limit for

conveying title to HUD, submitting title evidence,

submitting fiscal data or submission of supplemental claims

on conveyances must be submitted to the local HUD office,

ATTN: Single Family Property Disposition Branch.

2.All other extension requests must be submitted to the local

HUD office, ATTN: Single Family Loan Management Branch.

C.Time Requirements For The Submission Of Extension Requests.

1.Mortgagees must submit all extension requests prior to the

expiration of the time limit.

a.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.

b.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.

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9/94Page 1-8

GENERAL 4330.4

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The date of submission will also be verified for all

courier delivered requests.

c.Internal controls have been established in each of

HUD\'s local Offices to ensure that all extension

requests received are properly logged in and 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 HUD Office. If the mortgagee can

demonstrate to the local HUD Office\'s satisfaction that

the extension request was submitted timely, the local

Office will review the request for extension.

2.Extensions will not be granted retroactively, unless the

delay is directly related to the action of the HUD local

office.

3.A time requirement is not extended until the extension has

been approved in writing by HUD.

a.An extension will not be granted verbally.

b.Failure of the field office to meet a response time

limit set by the mortgagee will not be interpreted as

an extension approval.

c.HUD\'s direction to a mortgagee to take action, or HUD\'s

approval of a mortgagee\'s action, does not extend a

time requirement unless HUD extended the expiration

date in writing.

D.Basis For The Extension Request.

1.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.

2.Extension requests based on the following reasons will be

denied.

a.Investor or holder delay in obtaining required

documents.

b.Staffing constraints.

c.Errors of the servicer, holder and/or of any of the

previous holders or servicers.

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Page 1-99/94

4330.4 GENERAL

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d.Delays caused by the mortgagee\'s staff, agent or

contractor.

e.Failure by the mortgagee\'s staff, agency or contractor

to take appropriate, necessary or required action.

E.Extensions Will Not Be Approved For The Following.

1.Time requirement for the submission of Part A, Form

HUD-27011, Single Family Application for Insurance Benefits

Part A (any claim type except pre-foreclosure sales claims).

Mortgagees must submit their Claim for Insurance Benefits on

the date the deed or assignment is filed for record. (24 CFR

203.360, 203.351).

2.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).

F.Mortgagees Are Not Required To Request Prior Written Approval

From The Local HUD Office For Extensions Of Time Under The

Following Circumstances.

1.Bankruptcy or State law. HUD Regulations (24 CFR 203.355)

provide that if a mortgagee was prohibited by State law or

Federal bankruptcy law from instituting foreclosure within

nine months from the date of default, the mortgagee has 60

days from the date such prohibition was lifted to institute

foreclosure. In addition, in certain circumstances, the

mortgagee may have an extension longer than 60 days: see

Paragraph 2-2A for a complete discussion.

The date of the bankruptcy release must be entered in Item

21 Form HUD-27011, Part A and a date 60 days after that date

must be entered in Item 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 nine month requirement. If the

bankruptcy did not preclude the institution of

foreclosure within the nine month time frame, do

not enter an extension date in Item 19, unless

approved by the local HUD Office.\*

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4/95 Page 1-10

GENERAL 4330.4

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If more than 60 days are needed to initiate

foreclosure, mortgagees must request an extension

from the local HUD Office on Form HUD-50012.

2.Assignment Rejection. (24 CFR 203.355) 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:

a.The mortgagee sent either the HUD #2 or the HUD #3

Letter a minimum of twenty days prior to the expiration

of the nine month time limitation, unless the mortgagee

was prohibited from doing so by State Law (or

bankruptcy); and

\* b.The mortgagee had been prevented from initiating

foreclosure within nine months 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.

3.Time Frames for completion of Foreclosure. (24 CFR 203.356)

(Reasonable Diligence).

At the present time, the Department is not requiring that

mortgagees obtain prior written approval to exceed the 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 post claims review

process and Headquarters claim processing staff, as

appropriate.

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Page 1-119/94

4330.4 GENERAL

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4.Certain Supplemental Claims. (CFR 203.401(c)) Mortgagees

have a six month limitation to submit a supplemental claim.

Supplemental claims submitted after the six month limitation

will not be honored, except under the following

circumstances.

a.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:

(1)All hazard insurance costs when known, where

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.

(2)The mortgagee diligently followed up with the

hazard insurance carrier to confirm any necessary

adjustment.

(3)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.

(4)A copy of the carrier\'s notification is attached

to the mortgagee\'s supplemental claim.

(5)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.

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9/94Page 1-12

GENERAL 4330.4

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b.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\) or up to 3 months after the deficiency judgment,

whichever is later, subject to the following

conditions.

(1)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.

(2)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 ensure the deficiency judgment

has been resolved and that all deficiency judgment

costs are known and claimed at the time the

supplemental is filed.

A supplemental claim for deficiency judgment costs

should not be submitted until resolution of the

deficiency judgment.

c.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

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Page 1-139/94

4330.4 GENERAL

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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.

\* 5.Special Forbearance Agreement. If the mortgagee has entered

into a valid special forbearance agreement with the

mortgagor, the mortgagee need not request prior written

approval from the local HUD office for an extension of the

timeframe to initiate foreclosure.

NOTE:The mortgagee must commence foreclosure within 90

days following the date the mortgagor fails to

meet the requirements of a special forbearance

under 24 CFR 203.614. Exceeding this 90 day

timeframe requires prior written approval from the

local HUD office.

6.Pre-foreclosure Sales. If initiation of foreclosure is

delayed due to a mortgagor being accepted into the

pre-foreclosure procedure in accordance with HUD Guidelines,

the mortgagee need not request prior written approval from

the local HUD office for an extension of the timeframe to

initiate foreclosure.

Mortgagees have nine months from the date default to begin

the pre-foreclosure sale procedure with a mortgagor (i.e.,

indicate to the mortgagor in writing that he or she is

qualified to pursue buyer under the PFS procedure, and delay

the foreclosure sale date). If the PFS procedures commences

within the nine-month period, but is not completed within

that time frame, mortgagees are not required to request

prior written approval from the local HUD Office for an

extension. However, commencement of the pre-foreclosure

sale procedure near the nine-month deadline should be

avoided except in cases where other types of mortgagor

relief have been tried and failed (e.g., application for

assignment; special forbearance).

NOTE:If the Pre-foreclosure Sale Procedure is

unsuccessful, mortgagees have 60 days from the

date a mortgagor\'s bona fide participation in the

pre-foreclosure sale procedure ends either to

accept a deed-in-lieu of foreclosure or to

initiate foreclosure proceedings against that

mortgagor, if foreclosure had not been initiated

before the date the mortgagor began participating

in the

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9/94Page 1-14

GENERAL 4330.4

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PFS procedure, or is legally required to be

\"re-initiated\". This 60-day period is applicable

regardless of whether the nine month timeframe has

run, so long as the homeowner was participating in

the pre-foreclosure sale procedure during the

affected period. Exceeding this 60 day timeframe

requires prior written approval from the local HUD

office.\*

Compliance with all portions of Paragraph F will be

monitored through the post claims review process and

Headquarters claim processing staff, as appropriate.

G.Special Circumstances Which May Require The Mortgagee To Request

An Extension Of Time To Initiate Foreclosure.

1.Drug seizure related cases. Mortgagees will be prohibited

from initiating foreclosure in situations where the U. S.

Marshall/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 mortgaged property.

Mortgagees need not request an extension until the property

is released by the U. S. Marshall/DOJ and foreclosure action

or deed in lieu becomes necessary to acquire the property.

Because of the complexity of these cases, they will be dealt

with on a case-by-case basis. For cases where the mortgagee

needs an extension of time to initiate foreclosure, a

request should be made promptly to the local HUD Office.

Please contact the local HUD Office for guidance as to the

documentation required to be submitted with your extension

request.

2.Soldiers and Sailors Civil Relief Act of 1940. (24 CFR

203.346) The activation of certain reservists (such as to

the Persian Gulf in 1990) 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.

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Page 1-159/94

4330.4 GENERAL

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H.Claim Review File.

\* 1.A copy of HUD\'s written response to each extension request

or requests to exceed cost limits must be maintained in the

mortgagees\' claim review file. In addition, appropriate

documentation to support extensions not requiring prior\*

written approval as explained in Paragraph F must be a part

of the Claim Review File.

\* 2.If a subsequent claim review finds that an extension or an

approval to exceed cost limits was granted based upon a

misrepresentation of the facts, the claim will be considered

paid in error.\*

1-7 MORTGAGE INSURANCE CERTIFICATE.

In all types of claims for mortgage insurance benefits, the mortgagee

is required to attach the original Mortgage Insurance Certificate

(MIC) to the original of Part A when it is submitted to HUD

Headquarters. Where the original MIC is not available, a duplicate

MIC may be obtained from the local HUD office having jurisdiction over

the property. (Additional guidance for obtaining a duplicate MIC may

be found in HUD Handbook 4000.2, Rev-2, Mortgagees\' Handbook,

Application through Insurance dated July 30, 1991.)

A.All requests for a duplicate MIC must be in writing and forwarded

to the Chief of Mortgage Credit in the local HUD office. Provide

documentation that the case is insured (i.e., a copy of the MIC

reproduced from microfilm or other source), accompanied by a copy

of the mortgage note and a self addressed, stamped envelope.

(This will help assure that the duplicate MIC is returned to the

requesting lender rather than the originator.)

B.Old Section 221 Mortgages. Mortgage Insurance Certificates were

not issued for some old Section 221 mortgages. For these

mortgages, the mortgagee should submit a certification that the

mortgage is fully insured, that the insurance has not been

terminated and that no MIC was issued because it was an old

Section 221 mortgage. The certification must fully identify the

mortgage. Include a copy of the note showing the endorsement

date.

1-8 MORTGAGOR\'S SOCIAL SECURITY NUMBER.

All claims must have the mortgagor\'s social security number entered in

Item 33 of Part A, Form HUD-27011. Any claim submitted without the

number will be returned for correction and debenture interest will be

curtailed if the corrected claim is not received within the prescribed

time. If a co-mortgagor\'s social security number is available, it

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9/94Page 1-16

GENERAL 4330.4

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should also be entered. If there are additional mortgagors or

additional space is required, the \"Mortgagee\'s Comments\" space may be

used for this purpose.

If the application for a firm commitment was signed before August 15,

1986 the claim may be accepted without a social security number if:

-the mortgagee has made the annual requests for the mortgagor\'s

social security number that are required by the Internal Revenue

Service (IRS) but the mortgagor has failed to provide the

requested number;

-the mortgagee has made an exhaustive search of all available

records and cannot find the mortgagor\'s social security number in

addition to attempting direct contact with the mortgagor; and

-the defaulting mortgagor is either deceased or cannot be located

to provide the missing number.

Under these circumstances, the following certification, signed by an

authorized official of the mortgagee, must be attached to the claim or

entered in the \"Mortgagee\'s Comments\" section of the application.

\"I certify that no social security number is available for FHA

Case Number \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, upon which this
claim is based.

I further certify that I or representatives of my company have

searched for all available records and made all annual requests

for the mortgagor\'s social security number that are required by

the IRS.\"

The following remark, \"See attached\" must be entered in Item 33 in

lieu of the social security number.

1-9 MORTGAGE DEFAULT.

A mortgage is in default if the mortgagor fails to make any payment,

or to perform any other obligation under the mortgage, and such

failure continues for a period of 30 days. The date of a monetary

default is 30 days after the first failure to make a monthly payment

which subsequent payments are insufficient to cover when applied to

the overdue monthly payments in the order in which they became due.

Therefore, the date of default is either:

A.Two months from the due date of the last fully paid installment.

Example:

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Page 1-179/94

4330.4 GENERAL

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Due date of first installment 04/01/93

Due date of last fully paid installment 07/01/93

Date of first uncorrected payment failure 08/01/93

Date of default 09/01/93

B.One month from the due date of the first installment if no

payments are made

Example:

Due date of first installment 04/01/93

Date of first uncorrected payment failure 04/01/93

Date of default 05/01/93

If appropriate origination practices are followed, a situation

involving no payments should only occur in very unusual

circumstances.

Although subsequent payments may be sufficient to advance the

date of default when applied to overdue monthly payments, if the

time requirement to initiate foreclosure or record a deed-in-lieu

has been missed, such payments will not change the mortgagee\'s

failure to comply with the time requirement unless the payments

are sufficient to cure the default.

1-10 ATTORNEY\'S FEES.

A.Allowable Fees. HUD will reimburse the mortgagee for reasonable

and customary fees paid to attorneys and trustees in connection

with the foreclosure of a mortgage or other acquisition of title,

the assignment of a mortgage to HUD and with securing possession

of the property. For routine legal actions, HUD reimburses

mortgagees for attorney\'s fees based on the FNMA Schedule of

Standard Attorney\'s and Trustee\'s Fees. Formerly, mortgagees

were generally instructed to enter the amount actually paid to

the attorney, regardless of whether the fee exceeded the FNMA fee

or whether the amounts were reasonable, and the initial claim

payment was limited to the allowable amount. Mortgagees must now

follow the instructions below regarding what may be claimed for

attorney\'s fees (for all claims filed on or after June 25, 1994,

except that the 75% reimbursement rule discussed below applies

only to foreclosures referred to an attorney on or after June 25,

1994). Generally, mortgagees may enter no more than the FNMA fee

for a routine legal action and may enter only reasonable

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9/94Page 1-18

GENERAL 4330.4

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payments will not change the mortgagee\'s failure to comply with

the time requirement unless the payments are sufficient to cure

the default.

1-10 ATTORNEY\'S FEES.

A.Allowable Fees. HUD will reimburse the mortgagee for reasonable

and customary fees paid to attorneys and trustees in connection

with the foreclosure of a mortgage or other acquisition of title,

the assignment of a mortgage to HUD and with securing possession

of the property. For routine legal actions, HUD reimburses

mortgagees for attorney\'s fees based on the FNMA Schedule of

Standard Attorney\'s and Trustee\'s Fees. Formerly, mortgagees

were generally instructed to enter the amount actually paid to

the attorney, regardless of whether the fee exceeded the FNMA fee

or whether the amounts were reasonable, and the initial claim

payment was limited to the allowable amount. Mortgagees must now

follow the instructions below regarding what may be claimed for

attorney\'s fees (for all claims filed on or after June 25, 1994,

except that the 75% reimbursement rule discussed below applies

only to foreclosures referred to an attorney on or after June 25,

1994). Generally, mortgagees may enter no more than the FNMA fee

for a routine legal action and may enter only reasonable

amounts for contested foreclosures, contested evictions, contested

bankruptcies, required probate procedures, etc. If the mortgagee
complies

with the guidance, the need to file a supplemental claim for additional

funds for attorney\'s fees should be eliminated in all but a very few
cases.

FNMA revises its fee schedules from time to time; therefore the
mortgagee

should use care in ensuring the applicable schedule is being used. HUD

reserves the right to revise amounts which it considers reasonable and

customary at any time.

Mortgagees are expected to maintain adequate documentation in the

claim review files to support all attorney\'s fees. This will be

subject to verification during the post claim review. If a

mortgagee\'s claim is more than the amounts allowed by the following

instructions, it will be considered a monetary finding, and the

mortgagee will be billed for the statistically calculated overpayment

for all claims within the review period.

As before, if the mortgagee believes it is entitled to more than the

amount HUD actually reimbursed in the initial claim payment, the

mortgagee may file a supplemental claim for attorney\'s fees. However,

mortgagees may file only one supplemental claim, so any claim for

additional attorney\'s fees must be included in that one supplemental

claim. In addition, supplemental claims for attorney\'s fees should no

longer be sent to the Home Mortgage Division, Room 9258, as had been

previously directed. The claims should now be sent to the appropriate

address indicated in Par. 1-2.C. (See Chapter 7 for Supplemental

Claim Instructions.)

HUD will not reimburse a mortgagee for overhead items such as postage,

telephone, duplicating, etc. Attorney or trustee overhead costs

should be included in the attorney\'s fee.

Reimbursement for attorney\'s fees may be claimed by entering the

amount of the fee in the following Items in Part D of Form HUD-27011:

Item 305 - Mortgagees may enter in Item 305 an amount up to the

maximum FNMA fee for routine evictions, and reasonable attorney\'s

fees for contested evictions.

Item 306 - Mortgagees may enter in Item 306:

oa maximum of the FNMA fee for attorney\'s fees incurred in

any completed routine foreclosure and reasonable and

customary fees for a contested foreclosure.

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Page 1-19 4/95

4330.4 GENERAL

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oa maximum of 75% of the FNMA fee incurred for a routine

foreclosure that was not completed because:

\- the mortgagor filed a bankruptcy petition.

\- a deed-in-lieu of foreclosure was accepted after the

foreclosure was initiated.

\- HUD directed the mortgagee to terminate foreclosure in

order to permit assignment consideration, provided the

foreclosure was properly initiated. (See HUD Handbook

4330.1, REV-4, paragraph 8-7(F)).

\- the mortgagor was accepted into the Pre-foreclosure

Sale program or procedure.

oa maximum of the FNMA fee for attorney\' fees incurred for

specific legal services such as \"proceedings subsequent\" for

a Torrens title in Minnesota.

oa maximum of the FNMA fee for attorney\'s fees incurred for a

deed-in-lieu of foreclosure.

oreasonable attorney\'s fees incurred in preparing assignment

of a mortgage to HUD.

Item 307 - Mortgagees shall not enter attorney\'s fees in Item

307\.

Item 310 - Mortgagees may enter in Item 310 an amount up to the

FNMA fee for attorney\'s fees actually incurred for each

bankruptcy and reasonable and customary attorney\'s fees incurred

when the bankruptcy was not routine. Mortgagees may not claim

attorney\'s fees for defending \"cramdowns\" in bankruptcy. \*

B.Full and Two-Thirds Reimbursement. Allowable fees related to

assignment, and eviction or other possessory actions, are

reimbursable in full, but only two-thirds of fees paid in

connection with acquiring title to the property and its

conveyance to the Secretary are reimbursable. Bankruptcy

proceedings are related to the foreclosure action and are limited

to two-thirds reimbursement except in assignment claims.

In order to properly allocate attorney\'s fees between full and

two-thirds reimbursement, and permit review and payment, it may

be necessary to separate attorney\'s fees into six categories:

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9/94Page 1-20

GENERAL 4330.4

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1.Fees Related to Acquisition of Title. These fees relate to

the foreclosure action or deed-in-lieu of foreclosure and

are shown in Item 306. They are subject to two-thirds

reimbursement. Costs paid by the attorney and reimbursed by

the mortgagee are shown in Item 307. If the attorney bills

the mortgagee for unallowable costs, they should not be

listed in either item.

2.Fees Related to Eviction or Gaining Possession. A separate

fee is permitted only in jurisdictions where court

procedures do not enable the foreclosing party to obtain

possession as a part of the foreclosure action and a

separate proceeding must be brought. Eviction fees and

costs should be shown in Item 305. The fee for eviction

should not be shown in Item 306 nor should costs be shown in

Item 307 because eviction fees and costs are fully

reimbursable (up to amounts approved by HUD) and not limited

to two-thirds as in foreclosure costs.

3.Fees Related to Bankruptcy Proceedings. Fees related to

bankruptcy should be separately stated and shown in Item

310\. These fees are considered costs of acquisition and

subject to two-thirds reimbursement.

4.Fees Related to the Assignment of the Mortgage to the

Secretary. Fees related to assignment are reimbursable in

full and shown in Item 306.

5.Fees for Special Services. Extra costs or fees incurred as

a result of a defect in the mortgage transaction or a defect

in title which existed at, or prior to, the time the

mortgage was filed for record are not reimbursable, unless

the mortgage was sold by the Secretary or executed in

connection with the sale of the property by the Secretary.

6.Fees Related to Deficiency Judgments. Fees related to

deficiency judgments are reimbursable in full and shown in

Item 410. The fee for a judicial foreclosure when the

mortgage would otherwise be foreclosed by power of sale is

considered related to the deficiency judgment.

C.Salaried Employees. Compensation paid to an attorney or trustee

who is a salaried employee will not be reimbursed. The salary is

an obligation of the mortgagee unrelated to the foreclosure,

therefore, it is not a foreclosure cost \"actually paid\" by the

mortgagee (24 CFR 203.402(f)).

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Page 1-219/94

4330.4 GENERAL

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1-11 DEFICIENCY JUDGMENTS.

A.Pursuit of Judgment. Mortgagees are authorized to seek

deficiency judgments against mortgagors but costs associated with

such actions are reimbursable only if HUD requested or required

the action or approved the mortgagee\'s request to pursue a

judgment. The mortgagee must use the \"Claims Without Conveyance

of Title (CWCOT)\" procedure described in Chapter 6 in obtaining a

Commissioner\'s Adjusted Fair Market Value and in bidding at the

foreclosure sale. If the mortgagee is the successful bidder and

conveys title to the property to HUD, the claim for insurance

benefits must be filed as a conveyance claim (Chapter 2). If the

mortgagee retains the title or if a third party is the successful

bidder, the claim for insurance benefits must be filed as a Claim

Without Conveyance of Title (Chapter 6).

B.HUD Request. Generally, deficiency judgments will be sought

against mortgagors who retain significant assets or income after

foreclosure and can be expected to pay all or part of a

deficiency judgment within a reasonable time.

C.Collection. If a deficiency judgment is obtained, it must be

assigned to HUD within 30 days. The mortgagee shall not engage

in any collection activity.

D.Fees and Costs. Fees and costs are reimbursable only when HUD

requested or required the deficiency judgment action or when HUD

has approved the mortgagee\'s request to pursue the judgment. If

the costs of seeking a deficiency judgment are reimbursable, they

are 100 percent reimbursable. They should be entered in Item 410

of Part E and must be described in detail.

Allowable costs and fees are as follows:

1.Attorney fees which relate only to the deficiency judgment.

2.Additional filing or recording fees which relate only to the

deficiency judgment.

3.Costs related to a judicial foreclosure if local law

requires a judicial foreclosure in order to obtain a

deficiency judgment and the foreclosure would otherwise be

by power of sale.

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9/94Page 1-22

GENERAL 4330.4

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The time limit for filing a supplemental claim will be extended,

if necessary, for reimbursement of the cost of seeking a

\* deficiency judgment (See paragraphs 1-6F.4b and 7-5). \*

1-12 CLAIM FILE AND RETENTION OF RECORDS.

A.Claim File Maintenance. A claim file with complete records must

be maintained by the mortgagee on all cases for which a claim for

insurance benefits has been filed. Insurance claims are paid

through an automated payment system with control exercised

primarily on an exception basis. Since mortgagees are not

required to furnish receipts for reimbursable expenses with their

claims, the integrity of the system is dependent on mortgagee

compliance with claim processing requirements. Claim reviews are

conducted by HUD after payment to verify the accuracy of claim

submissions, and if inaccurate or

\* inappropriate claims are found, repayment is required. If a

question arises regarding the support of an amount reimbursed on

an insurance claim, the burden of proof is on the mortgagee to

show the amount is valid and reimbursable. Amounts charged to

the mortgagee by any third party (over and above allowable fees)

and claimed for reimbursement are subject to the same

documentation requirements the mortgagee is expected to meet

ifthe mortgagee expended the funds directly.\*

The mortgagee must be able to show support for all information

entered on the application for insurance benefits. Claim files

must be maintained for a period of three years after the date of

the last check received by the mortgagee in payment of a claim.

If the last notification from HUD was a billing then all records

must be maintained for a period of three years after resolution

of such billing. If the mortgagee is notified within the three

year period that its claims will be reviewed by HUD or its agent,

all claim files must be maintained until completion and final

settlement of the review. Claim files must be made available for

review within 24 hours of HUD\'s request. Mortgagees must be able

to retrieve claim files using the FHA case numbers. If

mortgagees wish to file according to their own internal numbering

system, they must maintain a cross reference with the FHA case

number. If a supplemental claim is filed, its resolution becomes

the last action for the purpose of establishing the three year

retention period. Documents may be stored on microfilm, provided

a legible hard copy can be produced within 24 hours of request.

The following records must be retained:

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Page 1-239/94

4330.4 GENERAL

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1.Copy of Parts A through E of Form HUD-27011.

2\. All records, loan payment history, documents, papers and

\* accounts relating to the mortgage transaction including all

collection and foreclosure notes relating to each FHA case

maintained in the system database.\*

3.Copies of the conditional commitment for insurance (if

applicable), the firm commitment (if applicable), the

mortgage insurance certificate (face and reverse), the

mortgage, and the mortgage note.

\* 4.The credit worksheet signed by the mortgagee\'s approved

underwriter (if applicable).\*

5.Copy of Deed or assignment with date of recordation.

6.A copy of transmittal letter, if deed or assignment is sent

to recording authority.

7.HUD letters of approval or disapproval with respect to

assignments, extensions, protection and preservation

expenses and damaged properties.

8.Foreclosure initiation document.

9.Bankruptcy supporting documentation.

10.Title Approval letter.

11.Title Submission Certification (for assignments only).

12.Receipts supporting all disbursements for which

reimbursement is claimed. (Canceled checks are not

considered receipts.)

13.Inspection reports (initial, occupied and vacant).

14.Any photographs needed to support protection and

preservation expenses.

15.Copy of buydown and rental agreements.

16.Payment advice letters.

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9/94Page 1-24

GENERAL 4330.4

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17.Copy of the Hazard Insurance Policy and Flood Insurance

Policy (if applicable).

18.Any additional information or data required by HUD

regulation, handbook, or mortgagee letter.

This is not intended to be an all-inclusive list. Mortgagees

must ensure the claim file contains documentation for all

information entered on the claim form.

B.Missing Claim Files. Claim files must be maintained for a period

of three years after final claim payment. If a claim file is

missing and cannot be produced for review, the Department may

consider all amounts for expenses and interest to have been paid

in error. HUD may charge a fee for the review of claim files

that are not provided to HUD when requested.

1-13 NEGATIVE CLAIM AMOUNT.

A. Original Claim. If the Net Claim Amount in Part B (Item 137) of

the original claim is a negative amount, do not send HUD a check.

HUD will calculate the claim making the necessary adjustments for

\* the costs of foreclosure and will bill the mortgagee for the

amount due. The date of HUD\'s billing letter is the date used

for the 3-year documentation-retention requirement. \*

B.Supplemental Claim. If the Net Claim Amount in Part B of a

Supplemental Claim is a negative amount, follow the instructions

in Paragraph 7-8.

1-14 REASSIGNMENT AND RECONVEYANCE.

A.Reassignment and Reconveyance. (24 CFR 203.364) If the mortgagee

conveys a property or assigns a mortgage to HUD which is

ineligible for insurance benefits or otherwise fails to comply

with the regulations, the mortgagee must promptly correct the

defect or HUD will reconvey the property or reassign the mortgage

to the mortgagee. If this occurs the mortgagee must reimburse

HUD for all expenses incurred in connection

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Page 1-25 5/95

4330.4 GENERAL

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with the acquisition, reconveyance or reassignment. If

reimbursement is not made promptly after

\* notice, HUD will collect the debt by administrative offset.

The reimbursement must include the amount of the insurance

settlement, interest on such amount from the date the insurance

benefits were paid to the date of refund at an interest rate set

in conformity with the Treasury Fiscal Requirements Manual, all

expenses incurred in connection with the acquisition and

reconveyance and HUD\'s cost of holding the property, accruing

on a daily basis, from the date the deed was filed for record to

the date of reconveyance. The holding costs shall be based on

HUD\'s estimate of the taxes, maintenance and operating expenses

of the property and administrative expenses.

\*

B. Reapplication. Upon reassignment or reconveyance the \*

application for insurance benefits shall be considered as

canceled without prejudice to the right of the mortgagee to

reapply for insurance at a subsequent date. Reapplication,

however, does not extend the time periods for the

performance of any required action. The claim will be

considered received at the time of reapplication. This will

result in a loss of interest in most cases because the time

limitation will not be met.

\*

For mortgages insured under firm commitments issued on or after

November 19, 1992 or under direct endorsement processing where

the credit worksheet was signed by the mortgagee\'s approved

underwriter on or after November 19, 1992, if the mortgagee

reapplies for insurance benefits the mortgagee will not be

reimbursed for any expenses incurred in connection with the

property after it has been reconveyed by the Secretary or paid

any debenture interest accruing after the date of the initial

conveyance or after the date conveyance was required by 24 CFR

203.359 of the regulations (see paragraph 2-2.D) whichever is

earlier and there will be deducted from the insurance benefits

any reduction in the Secretary\'s estimate of the value of the

property occurring from the time of reconveyance to the time of

reapplication (24 CFR 203.363).

\*

C. Damage or Defective Title. On discovery of damage to the \*

property or defective title, the field office will notify the

mortgagee to repair the damage within 90 days or correct the

defective title within 30 days in order to avoid reassignment

or reconveyance. One 30 day extension may be granted by the

field office if requested within the 90 or 30 day time frame.

If the damage or defect reduces the value of the property by a

measurable amount but does not prevent its sale, HUD may agree

to accept the

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9/94Page 1-26

GENERAL 4330.4

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property and reduce the insurance benefits in an amount which

will compensate the mortgage insurance fund for any anticipated

loss.

For mortgages insured under a firm commitment issued on or after

November 19, 1992, or under Direct Endorsement processing where

the credit worksheet was signed by the mortgagee\'s approved

underwriter on or after November 19, 1992 if the title to a

property conveyed to the Secretary is not good and marketable,

the mortgagee will be required to correct the defect within 60

days after receiving notice from the Secretary or within such

further time as the Secretary may approve in writing. In this

case, the mortgagee may retain the insurance benefits already

paid, but it will not be reimbursed for any costs involved in

correcting the title (24 CFR 203.402(f)) (See paragraph 2-6D).

For specific requirements relating to the condition of the

property at the time of conveyance, see paragraph 2-10.\*

\* D.Uninsured Mortgages. If the mortgagee submits a claim on a

mortgage which was not insured by HUD, the property will be\*

reconveyed or the mortgage will be reassigned and the mortgagee

will be required to reimburse HUD as above. If the property has

been sold, HUD will remit to the mortgagee the property\'s sales

price less the expenses of sale and expenses incurred while the

property was in HUD\'s inventory (taxes, utilities, repairs,

management fees, etc.).

1-15 QUALITY ASSURANCE.

HUD Regulation 24 CFR 202.12(j) requires approved mortgagees to have

a written Quality Control Plan for loan origination and servicing.

HUD has established minimum requirements which must be met for a

Quality Control Plan to be acceptable to HUD. Mortgagees\' policies,

procedures and practices with respect to origination and servicing

have a direct impact on the number of claims filed, the amount of loss

to the government, and quality and accuracy of claim submissions.

Following are some of the determinations relating to claims which

mortgagees must make in order to meet HUD\'s minimum requirements. A

complete listing of HUD\'s Quality Control Plan minimum requirements

can be found in Handbook 4060.1, Mortgagee Approval Handbook.

Mortgagees must determine that:

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4330.4 GENERAL

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A.Insurance claims are properly calculated and claim amounts are

fully supported.

B.A thorough review of the claim application has been accomplished

to verify that supporting documentation exists for all

information entered on the claim form.

C.A thorough review is accomplished when filing a supplemental

claims to ensure that no other adjustments are needed.

D.Deeds-in-lieu are pursued where appropriate and deficiency

judgments are taken where required.

E.Property inspections are performed when the mortgagor fails to

make a mortgage payment and no contact is possible within 45 days

of the due date, or if the mortgage is in foreclosure and the

property is vacant (see 2-11B for more detailed inspection

requirements).

F.HUD-FHA monthly reporting requirements under the Single Family

Default Monitoring System are complied with.

G.Foreclosure proceedings are initiated and completed on a timely

basis and in accordance with HUD-FHA requirements.

H.Sufficient controls exist to assure that preparation of insurance

claims are complete, accurate and timely, in order to minimize

any loss to HUD.

1-16 REVIEW OF CLAIMS.

The automated system for the payment of insurance benefits relies on

the accuracy of the information provided by the mortgagee on the claim

form. Therefore all information entered on the claim form must be

supported by documentation in the claim file.

In order to verify the accuracy and appropriateness of amounts

claimed, HUD or its agent may conduct a review of the claim file at

any time within three years after the claim is paid. The mortgagee

who files the claim as the Servicing Mortgagee is responsible for the

completeness and accuracy of the claim submission. It is the

responsibility of the Servicing Mortgagee to remit any overpayments

identified on claim payments made by HUD. Statistical sampling may be

used to select claims for review and determine the amount due HUD for

overpayments. Denial of access to a file will be grounds for

withdrawal of the mortgagee\'s approved lender

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9/94Page 1-28

GENERAL 4330.4

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status, debarment by the Secretary, or immediate suspension of all

claim payments to the mortgagee.

Mortgagees must promptly reimburse HUD for any amount overpaid because

of incorrect, unsupported or inappropriate information provided by the

mortgagee.

A.Frequency of Reviews. The Department may review any claim file

at any time during the required claim file retention period. See

paragraph 1-12.

B.Notification to Mortgagee. The Department will notify mortgagees

by letter prior to the commencement of a claims review. Upon

request by the Department, the mortgagee will make available for

review, hard copy claim files for any paid claim within 24 hours

of such a request.

C.Evaluation of Results. The result of a claims review will be

evaluated prior to the issuance of a report. Any discrepancies

resulting from inaccuracies, omissions, unsupported claim

information will be identified and provided to the mortgagee in

the initial report.

D.Reporting Process. After completion of the reviews, the

Department will issue the initial report identifying the errors

found, the mortgagee\'s potential liability, and whether or not

the mortgagee is in compliance with Department guidelines.

E.Billing. The mortgagee\'s potential liability will be identified

in the initial report. Mortgagees will have 45 days from the

date of the report to provide any additional documentation that

could affect the review results. If no additional documentation

is provided within 45 days, the report will be considered final

and the potential liability identified will become the amount

owed.

If additional information is provided, it will be reviewed and

adjustments to the potential amount owed will be made. Once the

final amount is determined, the mortgagee will be billed and

required to pay within 14 days. If payment is not received

within 30 days, interest will accrue from the date billed on the

amount owed. If payment is not received within 90 days, a

penalty plus administrative costs will be assessed.

F.Administrative Offset. If reimbursement is not made promptly

after the final amount is determined HUD may collect the debt by

administrative offset or other means.

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