4330.1 REV-5

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CHAPTER 8. HUD-APPROVED RELIEF PROVISIONS

8-1 FORBEARANCE RELIEF. Any of the relief measures discussed in this

chapter may be used. Mortgagees are expected to make a concerted

effort to avoid the foreclosure or assignment of HUD-insured

mortgages, and to utilize acceptable methods of forbearance relief,

wherever feasible and when:

A. it is reasonable for the mortgagee to believe that the mortgagor

can and will resume the mortgage payments;

B. the forbearance plan entered into is made up of set \"reasonable\"

monthly payments (i.e, one that has provided for specific monthly

payments based on the mortgagor\'s ability to pay); and

C. compliance with the terms of the forbearance plan will bring the

mortgage completely current paid in full.

Mortgagees are expected to refrain from foreclosure where it is

determined that the case may be salvaged through the use of one or

more of these procedures.

NOTE: Failure to abide by these rules could result in curtailment

of the claim.

The decision to grant forbearance is at the discretion of the

mortgagee. However, repeated refusal to afford such relief under

conditions in which it might have precluded foreclosure or the need to

assign the mortgage to HUD might be considered cause for suspension or

termination of the mortgagee\'s approval.

8-2 DELINQUENCY AND DEFAULT COUNSELING. Mortgagors who are one or more

months behind in their mortgage payments must receive a list of

HUD-approved housing counseling agencies in their state. This action

is required by Section 169 of the Housing and Community Development

Act of 1987.

The intent of the Act is to provide mortgagors with the opportunity to

contact HUD-approved housing counseling agencies, obtain counseling

advice and assistance, and become current on their monthly mortgage

payments. Housing counseling agencies will advise and assist

mortgagors during the period of delinquency and default, and also

during the mortgage assignment process. Mortgagors who receive

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8-19/94

4330.1 REV-5

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counseling early are much more likely to bring their mortgages

current, and bring them current within a smaller period of time.

There are no penalties in the Act. However, the mortgagor may request

the court to stop foreclosure proceedings until the mortgagee provides

the list and the mortgagor has had sufficient time to seek housing

counseling. If foreclosure has occurred, the court may hold the

mortgagee liable for losses sustained on account of the foreclosure.

8-3 FORBEARANCE PROCEDURES

A. Withholding Of Foreclosure By Mortgagee. The mortgagee may hold

the account in a default status and withhold taking action to

acquire the property while continuing to work with the mortgagor.

All funds remitted by the mortgagor during this period shall be

applied to the account in accordance with the terms of the

mortgage. Since the date of default is thirty days after the

date of the oldest unpaid installment (Paragraph 7-2E), the

account can be carried in default for an extended period of time,

if the mortgagor makes payments during the period of default.

NOTE:Each payment made by the mortgagor will advance the

date of default since the payment must be applied to

the oldest unpaid installment due.

B.Types Of Forbearance. Forbearance agreements are generally

classified as informal, formal or special. Any delinquent

mortgagor may be offered forbearance. Mortgagees have greater

flexibility in the use of informal or formal forbearance

agreements than for special forbearance agreements. Repayment

plans and Forbearance agreements must always be realistic and

based upon the mortgagor\'s ability to pay. (See Appendix 24 for

examples of a formal forbearance agreement (repayment plan) and

the two types of special forbearance agreements.)

1.Informal (Verbal) Forbearance. A verbal agreement is

considered an informal forbearance agreement. This type of

forbearance agreement may be used when the arrearage is

small and/or the duration of the agreement will be three

months or less.

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9/948-2

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2.Formal Forbearance. If the agreement is in writing, it is

considered a formal forbearance agreement. This is usually

a short term (less than 18 months) repayment plan.

NOTE:Under 1 and 2 above, mortgagees may enter into a

repayment agreement by increasing mortgage payments

before the maturity date without prior HUD approval.

3.Special Forbearance. A specific type of a formal

forbearance agreement is \"special forbearance\". Special

forbearance is a servicing tool designed to give the

mortgagor more relief than is possible with a regular

repayment plan. Only if all the requirements of 24 CFR

203.614 have been met, can the forbearance agreement be

considered as a \"special forbearance\". (See Paragraph 8-4).

C.Payment Of Insurance Claims. The mortgagee may receive unpaid

mortgage note interest to a date specified in paragraph 8-4(D) if

a valid special forbearance has been entered into. To this

extent, the mortgagee may benefit in the payment of his insurance

claim should the default not be curable and a conveyance claim

result.

This contrasts with the payment of interest at the debenture rate

from the date of default for cases where no special forbearance

was utilized. The procedures for special forbearance are

described in Paragraph 8-4.

8-4 SPECIAL FORBEARANCE PROCEDURE - (24 CFR 203.614).

A.HUD Approval Not Required. The mortgagee may grant special

forbearance relief without HUD approval, provided that:

1.the mortgagor does not own other property subject to a

FHA/HUD-insured mortgage, and

2.the default was caused by circumstances beyond the

mortgagor\'s control.

3.the special forbearance agreement will not require increased

payments before the original maturity date of the mortgage.

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8-39/94

4330.1 REV-5

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B.HUD Approval Required. In no case shall a special forbearance be

appropriate if the default was not due to circumstances beyond

the mortgagor\'s control. Where this condition is met, but the

circumstances of the case do not allow the mortgagee to enter

into a special forbearance without prior permission, the Field

Office manager may authorize the mortgagee to enter into a

written special forbearance agreement. Mortgagees must request,

in writing, authorization for special forbearance in the

following instances:

1.the suspension or reduction of payments is for a period of

more than 18 months.

2.the mortgagor owns other property subject to a HUD-insured

mortgage.

3.the forbearance agreement shall require increased payments

before the original maturity date of the mortgage.

In order for the local HUD Office to make a decision, the request

for an approval of a special forbearance agreement must be

accompanied by sufficient supporting documentation. Some

examples of the type of supporting documentation normally needed

for the local HUD Office to make its decision are as follows:

1.copy of the proposed forbearance agreement;

2.copy of the ledger history;

3.copy of the collection history;

4.copies of the HUD assignment letters, if applicable;

5.copies of any relevant financial documentation provided by

the mortgagor;

6.copy of the management review checklist establishing

mortgagor\'s eligibility;

7.signed copy of the \"Special Forbearance Checklist\" (See

Appendix 23); and

8.any other documentation which will assist in establishing

mortgagor\'s eligibility.

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9/948-4

4330.1 REV-5

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For all claims where the mortgagee requested mortgage note

interest reimbursement for a special forbearance agreement, the

mortgagee must maintain in the claim review file all supporting

documentation and the response from the local HUD office if

applicable.

C.Content Of Written Forbearance Agreement. The requirements for

special forbearance agreements that the mortgagee may enter into

without HUD approval are very specific. The mortgagee has more

flexibility in establishing the payment schedule for those

special forbearance agreements that have been approved by HUD.

To be considered valid, all special forbearance agreements must

provide the mortgagor some additional relief. (See Appendix 24

for examples of special forbearance agreements.)

1.Agreements not requiring prior HUD approval. The written

forbearance agreement shall provide for:

a.the suspension or reduction of payments for a period of

not more than 18 months, or it may acknowledge that

payments have already been suspended or reduced; and

NOTE:The fact that forbearance agreements are entered

into because payments have been missed, does not

automatically constitute compliance with this

requirement. In order to meet this requirement,

previously missed mortgage payments must be

acknowledged in the written special forbearance

agreement.

b.the resumption of regular mortgage payments after the

period of reduced or suspended payments; and

c.the repayment of the total unpaid amount accruing prior

to and during the period of reduced or suspended

payments on or before a date extending beyond the

original maturity date for a period no longer than the

forbearance.

2.Agreements requiring prior HUD approval. The written

agreement shall provide for:

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8-59/94

4330.1 REV-5

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a.temporary relief for the mortgagor. To accomplish this

relief, mortgagees may utilize a combination of periods

of reduced and\\or suspended payments as well as periods

where the mortgagor may be required to make only his

regular payment;

b.a realistic schedule of increased payments that will

enable the mortgagor to bring his account current based

upon his ability to pay;

c.the resumption of the mortgagor\'s regular payments

after the expiration of the forbearance period; and

d.the payment of the total unpaid amount accruing prior

to and during the period of forbearance on or before

the maturity date of the mortgage or on or before a

date subsequent to the maturity date that is approved

by HUD.

D.Payment Of Insurance Claims - Special Forbearance.

When the mortgagee extends special forbearance pursuant to

Paragraph 8-4A or 8-4B, it will receive, as part of its insurance

settlement on special forbearance agreements, unpaid mortgage

interest, including all amounts accrued prior to the execution of

the forbearance, computed to the earliest of the applicable dates

described below:

1.the date of assignment of the mortgage to the Secretary;

2.the date of institution of foreclosure proceedings;

3.the date of the deed in lieu of foreclosure;

4.a date 90 days following the date the mortgagor fails to

meet the requirements of the forbearance agreement, or

5.such other date as the Field Office manager may approve, in

writing, prior to the expiration of the 90-day period.

When circumstances beyond the mortgagee\'s control require an

additional period of time, an extension

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9/948-6

4330.1 REV-5

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of time may be requested from the local Field Office manager

as long as the request is submitted prior to the expiration

of the approved extension.

NOTE:If a claim for insurance benefits is filed as a result

of the mortgagor\'s default under the agreement, a copy

of the forbearance agreement must accompany the claim.

Any request of mortgage note interest on a claim for

insurance benefits which is not fully supported, will

not be honored. The \"Special Forbearance Checklist\"

was developed as a tool to help mortgagees establish if

the case meets the minimum requirements for special

forbearance. A signed copy of the checklist must be

submitted with the claim and a signed copy must be

maintained with the claim review file.

8-5 FORBEARANCE RELIEF PROVISIONS FOR MILITARY PERSONNEL

A.Paragraphs 8-3 And 8-4. The forbearance relief provisions

described in Paragraphs 8-3 and 8-4 are available to all

mortgagors including military personnel. Use of written

forbearance agreements with mortgagors who are in military

service is encouraged.

B.HUD Regulations 24 CFR 203.345 and 203.346. These regulations

provide for persons called to active military service two special

relief measures which are as follows:

1.\". . . the mortgagee may, by written agreement with the

mortgagor, postpone for the period of military service and

for 3 months thereafter any part of the monthly mortgage

payment which represents amortization of principal. The

agreement shall contain a provision for the resumption of

monthly payments after such period in amounts which will

completely amortize the mortgage debt within the maturity as

provided in the original mortgage . . . \"

2.\"If at any time during default the mortgagor is a person in

military service, as such term is defined in the Soldiers\'

and Sailors\' Civil Relief Act of 1940, the period during

which he is in such service shall be excluded in computing

the one-year period within which the mortgagee shall

commence foreclosure

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8-79/94

4330.1 REV-5

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or acquire the property by other means as provided in this

subpart.\"

Section 203.346 permits the mortgagee which commences

foreclosure proceedings during the period of military

service to voluntarily postpone completing them while the

mortgagor is on active duty, regardless of whether

application has been made to a court for a stay of

foreclosure. Mortgagees may voluntarily withhold

foreclosure with or without applying partial payments which

advance the date of default.

C.The Soldiers\' And Sailors\' Civil Relief Act Of 1940 (The Act).

This Act provides additional relief, but it does not amend the

National Housing Act. HUD has always taken the view that it is

not in a position to interpret all the various provisions of the

Act as they may affect rights between mortgagees and mortgagors.

Such interpretations should be obtained from the Department of

Defense, the mortgagee\'s attorney, or are a matter for

determination by the courts.

The provisions of the Act apply only to military personnel who

had a mortgage obligation prior to enlistment or induction for an

initial tour of duty or prior to recall after a break in service,

and to reservists or National Guard members who have an existing

contract obligation when subsequently ordered to active duty.

Section 511 of the Act defines a person in the military service

as all members of the Army, Navy, Marine Corps, Air Force, and

Coast Guard, and Public Health Officers detailed to the Army or

Navy on active duty.

1.Protection During Foreclosure. Sections 520, 532 and 590

provide protections during foreclosure, but the Act does not

relieve a mortgagor in military service of the obligation to

make mortgage payments during the period of service,

although a court may grant a stay of enforcement of the

obligation.

The Act is not a bar to foreclosure, but foreclosure sales

during the period of military service or within three months

thereafter are not valid, under Section 532, unless: (1)

the courts permit them because of their determination that

military service has not materially affected the mortgagor\'s

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9/948-8

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ability to pay the debt, or (2) they take place pursuant to

a written agreement entered into after the commencement of

active duty between the parties involved, as provided in

Section 517 of the Act. Violations of Section 532 can

result in a prison term up to one year or a fine up to

\$1,000 or both.

2.Assignment Program Requirements for Mortgages Affected by

the Act.

a.When Court Permission is Required for Assignment

Letters. Whenever an affected mortgage is in default

and the court\'s permission is needed to either initiate

or complete foreclosure, the mortgagee must obtain such

permission prior to sending the assignment letter 2 or

3\. (This is to assure the ability to foreclose.) If

the court permits the initiation and completion of

foreclosure, foreclosure must be suspended until the

assignment notices are sent. If the mortgagor requests

assignment, the suspension must continue until the

Field Office issues a final decision.

b.When Court Permission is Not Required for Assignment

Letters. Under two conditions court permission is not

required:

(1)If the account remains in default after six months

from the completion of active duty and the

mortgagor has not been approved for a \"stay of

foreclosure\" to extend a repayment plan under

Section 590 of the Act, a mortgagee may send the

required assignment letters without seeking prior

approval of the court to initiate or complete

foreclosure.

(2)If a mortgagor has obtained a repayment plan under

Section 590 but fails to keep the terms of the

court approved plan, assignment letters may be

sent without court approval.

3.Reduction of Interest Rate. See Appendix 24(A) for

discussion of reduction of mortgage interest rate provided

by the Act, and its effect on claim payments.

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8-99/94

4330.1 REV-5

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D.HUD-Approved Extensions Of Forbearance Are Not Required. Cases

involving military personnel do not require HUD-approved

extensions of forbearance for the period of military service

which may extend beyond 18 months, but, in no event shall extend

beyond 3 months after discharge.

8-6RECASTING A MORTGAGE (24 CFR 203.616 and 203.342). If a mortgagee and

mortgagor are in mutual agreement, the mortgagee may grant relief to

the mortgagor by modifying the amortization provisions of the mortgage

to recast the total unpaid amount due under the mortgage to become the

new principal balance due over the remaining term of the mortgage or a

longer term as provided by 24 CFR 203.616. (See Paragraph 3-2 for

detailed instructions as to how mortgages may be recast (modified)).

8-7SPECIAL RELIEF PROVISIONS - ASSIGNMENT OF DEFAULTED MORTGAGES TO THE

SECRETARY. To give financially distressed mortgagors an opportunity

to avoid foreclosure and retain their homes, mortgagees must abide by

the following assignment program procedures. It is HUD\'s position

that mortgagees may not commence foreclosure or acquisition of the

property until the requirements of the assignment program have been

met. (See Appendix 25, Assignment Program Schedule.)

NOTE:The requirement to accept assignments applies to all insured

single family mortgages, including single family mortgages

coinsured by HUD pursuant to Section 244 of the National

Housing Act.

The eligibility and procedural requirements of this paragraph

(Paragraph 8-7) apply to acceptance of assignments under the

provisions of 24 CFR Section 203.650 through 203.666 of the

regulations.

Assignment Requests for Coinsured Mortgages. Mortgages which have

been coinsured under appropriate Sections of the National Housing Act

are eligible for assignment consideration. Assignment processing

procedures are not affected by the coinsurance agreement between HUD

and an FHA-approved coinsurance mortgagee.

The only difference between a coinsured mortgage and any other

mortgage is that if the coinsured claim is presented within the period

of coinsurance (i.e., the first 60 months of the mortgage), an

accounting adjustment is made in HUD

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9/948-10

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Headquarters between a portion of the mortgagee\'s claim amount and the

amount set aside in the mortgagee\'s Coinsurance Reserve Account.

A.Eligibility Criteria. The criteria listed below are the only

criteria on which eligibility for assignment may be based. No

other criteria may be considered and the facts relied upon in

making a decision must be related specifically to these criteria.

1.The mortgagee must have indicated to the mortgagor its

intention to foreclose the mortgage. The following

requirements must be met in order to satisfy this criterion:

a.The mortgagee must be able to foreclose. The mortgagee

is presumed to be able to foreclose unless, under

applicable State and Federal law (including the

bankruptcy acts), it is unable to begin the foreclosure

process.

NOTE:If a mortgagor is involved in bankruptcy

proceedings, the mortgage cannot be considered,

accepted or rejected for assignment until the

court has dismissed or completed the bankruptcy

proceedings, or has exempted the mortgaged

property from the bankruptcy proceeding.

Since a bankruptcy filing prohibits foreclosure

action until the bankruptcy is dismissed or

completed, or the mortgaged property is exempted

from the bankruptcy proceeding, the following

actions will be taken by Field Offices on

assignment cases involving bankruptcy.

(1)If Letter #3 has been sent and the mortgagor

filed bankruptcy before the time period for

appeal to the Department elapsed, the

assignment letters #2 or #3 must be sent

again when the bankruptcy stay is lifted to

afford the mortgagor the opportunity for an

assignment eligibility review. If payments

have been applied during the bankruptcy there

would be a new date of default. The new

default date

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8-119/94

4330.1 REV-5

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would be 30 days after the due date of the oldest

unpaid installment.

(2)If Letter #2 has been sent before the bankruptcy

was filed and before the Field Office had

announced a final decision, the case would be

returned to the mortgagee for additional servicing

until the mortgage became current or the

bankruptcy stay was lifted. Upon lifting of the

stay the mortgagee must refer the case back to the

Field Office to be reopened and processed to a

final decision if the mortgage is still at least 3

months due and unpaid. If during the bankruptcy

the case later was brought current and later went

into default, the assignment letters must be

re-sent with the new date of default as the basis

for eligibility under the circumstances criterion.

(3)Bankruptcy Payments Applied.

(a)If Letter #3 has been sent and the mortgagor

files bankruptcy AFTER 20 days has expired

and did not contact the local Field Office,

the mortgagee may proceed directly to

foreclosure after the stay is lifted without

sending the HUD Letter 1, 2, or 3 again, if

payments applied during the bankruptcy

process do not bring the account less than 3

months due and unpaid.

(b)If Letter #3 has been sent and the mortgagor

files bankruptcy AFTER 20 days has expired

and did not contact the local Field Office

and payments made through the process brings

the account less than 3 months due and

unpaid, the mortgagee looses its ability to

foreclose and HUD letters 1, 2, and 3 must be

re-sent as if it is a new default, once the

stay has been lifted.

(4)If the bankruptcy is filed after the Field Office

issued a final decision letter and the mortgage is

neither reinstated nor becomes less than 3 months

due and unpaid

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9/948-12

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during the bankruptcy, then foreclosure may be

initiated without sending the assignment letters

again. Of course, if the ability to foreclose is

lost because the account became less than 3 months

past due during the bankruptcy, assignment letters

must be sent for the new default.

(5)If foreclosure was initiated by the mortgagee and

was stopped on the day of the sale due to a

bankruptcy declaration by the mortgagor, the

mortgagee does not re-send the assignment letters

and can proceed with the foreclosure after the

bankruptcy stay is lifted.

(6)At any time that the intent to foreclose is

withdrawn by either a formal or informal

forbearance agreement with the mortgagor before

HUD receives an assignment request, the assignment

letters must be sent if the forbearance fails to

bring the account current.

b.The servicing mortgagee must have made the decision to

foreclose prior to sending HUD Letter #2 or 3 to the

mortgagor. The investor approval must be obtained

prior to Letter #2 or 3 being sent. (See Paragraph

7-11.)

(1)This approval or final decision to foreclose may

be made by:

(a)the holder of the mortgage; or

(b)a servicing mortgagee authorized by the

holding mortgagee to make the final decision

to foreclose.

NOTE:Where a servicing mortgagee recommends to the

holding mortgagee that foreclosure be

approved, the holding mortgagee must give

written approval for the servicing mortgagee

to begin foreclosure proceedings. Blanket

approval from the investor is acceptable.

Even though the servicing mortgagee has made

a decision to foreclose, the servicer does

not have to obtain the

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8-139/94

4330.1 REV-5

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foreclosure approval until notifying the mortgagor

of its decision to request or not request that HUD

accept an assignment; that is, prior to sending

Notice #2 or #3. This approval must be sent with

the assignment processing package to the local HUD

Office.

(2)An approval to foreclose on an investor\'s mortgage

may be conditioned upon HUD\'s rejection of an

assignment request, but the authorization can

include no other conditions.

c.The mortgagee must have notified the mortgagor of its

intention to foreclose. The mortgagee must have given

the mortgagor two separate, written notifications of

his or her rights under the assignment program. The

notices must have included the foreign language text

and entire substance of the examples as shown in

Appendix 26, 27, or 28.

2.After any partial payments that may have been accepted from

the mortgagor have been applied to the mortgage, at least 3

full monthly installments must remain due and unpaid on the

mortgage. This criterion is satisfied the day after the due

date of the third completely unpaid installment.

NOTE:HUD Letter #1 can be sent as early as the 61st day

of delinquency.

Example:If the full January, February and March

installments are unpaid, three full installments

are due and unpaid on the day after the March due

date. But, if any part of the January installment

has been paid, three full installments will not be

due and unpaid unless the April installment is

completely unpaid.

This criterion is satisfied when the amount due and unpaid

equals or exceeds the total of 3 monthly installments.

NOTE:On mortgages insured under Section 235, this

refers only to the mortgagor\'s share of the

monthly installment.

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9/948-14

4330.1 REV-5

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a.Any partial payments accepted by the mortgagee must be

applied to the account prior to calculating the date of

default.

b.Partial payments accepted on a delinquent account that

is being reviewed by HUD for an assignment must be

reported to the local Field Office as it could advance

the date of default.

c.If the date of default has already been established by

the issuance of the HUD preliminary decision letter

then the date of default would not be advanced.

d.If a preliminary review has not been issued and a

partial payment is accepted which reduces the mortgage

delinquency to the point where the mortgage is no

longer three or more full monthly installments behind,

the assignment request must be closed out by the local

Field Office and returned to the mortgagee for further

servicing.

NOTE:Refer to Chapter 7-9 for partial payment

requirements.

Example:If a mortgagor who owes 5 monthly

installments receives HUD Letter #3 and then

pays the equivalent of 3 monthly installments

(and the payment is accepted by the

mortgagee), consideration for the assignment

program cannot continue as the mortgage is no

longer 3 full monthly installments due and

unpaid on the mortgage.

At a later date, should the mortgage again become 3

full monthly installments delinquent, the mortgagor

would be entitled to assignment consideration a second

time. The date of default would be calculated in

accordance with Paragraph 7-2E based on this

delinquency (i.e., 30 days after the due date of the

oldest unpaid installment). The mortgagee would then

re-send the HUD assignment letters.

3.The property is the mortgagor\'s principal residence.

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8-159/94

4330.1 REV-5

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Since mortgagees may not have enough information to decide

this criteria and only HUD has the authority to waive this

criteria, mortgagees must document the case file with

respect to criteria.

4.The mortgagor does not own other property subject to a

mortgage insured or held by HUD.

Since mortgagees may not have enough information to decide

this criteria and only HUD has the authority to waive this

criteria, mortgagees must document the case file with

respect to criteria.

5.The default must have been caused by a circumstance or set

of circumstances beyond the mortgagor\'s control which

rendered the family unable to cure the delinquency within a

reasonable time or make full mortgage payments.

NOTE:When defining the date of default as it relates to

the circumstances of the mortgagor, the date of

default as cited in Paragraph 8-7A1a(1) must be

used.

Examples of qualifying reasons for default include, but are

not limited to:

a.Curtailment of family income such as unemployment or

underemployment; loss, reduction or delay in receipt of

federal, state, municipal benefits (e.g., Social

Security, Supplemental Security Income, Public

Assistance, government pensions) or of private benefit

payments (e.g., pensions, annuities, retirement plans);

loss of support payments; or other loss of income due

to divorce, illness or death.

b.Uninsured damage to the mortgaged property, affecting

its livability and necessitating costly repairs.

c.Expenses related to death or illness in the mortgagor\'s

household or of family members living outside the

household which have significantly reduced the amount

of income available to meet the mortgage payment.

d.Unanticipated increase in payments to mortgage escrow

account to compensate for past underestimates of

requirements.

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9/948-16

4330.1 REV-5

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6.There is a reasonable prospect that the mortgagor will be

able to resume full mortgage payments after a temporary

period of reduced or suspended payments, not exceeding 36

months, and will be able to pay the mortgage in full by its

original maturity date extended, if necessary, by up to 10

years.

a.When evaluating this criterion, the mortgagee shall

determine if the mortgagor\'s prospective income will be

sufficient to cover the minimum payment which can be

expected at the time full payments resume (a date no

more than 36 months after the assignment is accepted).

This minimum payment is the amount needed to cover

monthly escrow requirements and to amortize the

outstanding principal balance and accrued delinquencies

over the remaining term of the mortgage or over the

original term extended by up to 10 years.

b.Future ability to pay is the key factor in evaluating

this criterion (not present income or credit history).

No applicant for assignment shall be determined

ineligible based simply upon lack or type of income at

the time the assignment request is processed. All

present (if the mortgagor is employed at the time the

assignment is being processed) and prospective sources

of income must be considered when determining

reasonable prospect for repayment, such as employment,

welfare payments, pensions, insurance awards, child

support and alimony payments, etc. Likewise, no

mortgagor may be denied an assignment simply because

his/her housing expense exceeds an arbitrary benchmark

(e.g., 35 percent of net effective income). Each

mortgagor must be evaluated according to his or her

family\'s needs and lifestyle.

In evaluating this criterion, mortgagees shall consider

the income and expenses reported by the mortgagor on

Form HUD-92068F, Request for Financial Information

(Appendix 29), as well as the factors listed below.

(1)Non-Cash Benefits Which Reduce Expenses. Some

households receive services or non-cash benefits

which reduce their cash

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8-179/94

4330.1 REV-5

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outlay for living expenses and free more income

for application to the mortgage payment.

Such benefits could include, but are not

necessarily limited to, food stamps, free medical

services (in the case of military or low income

families), company-provided automobile, or receipt

of food and clothing from family members living

outside the household.

(2)Changes in Recurring Expenses. Monthly expenses

may change in the future as age and composition of

the household alters, short-term or installment

loans are paid in full, members of the household

transfer from school to full-time employment, or

vice versa.

(3)Lifestyle. Each household distributes its income

according to its own priority of needs. Some

households prefer to hold housing expenses to a

minimum and spend a larger proportion of their

income on recreation or non-essential items while

others will forego non-essentials and invest a

high percentage of their income in a home.

The mortgagor\'s past spending patterns should be

reviewed carefully. If the mortgagor has

demonstrated the ability to make regular mortgage

payments, even when those payments represented a

large percentage of his or her income, the

mortgagor should be given the benefit of the doubt

when evaluating ability to resume full payments

and pay in full by the maturity date.

(4)Employment, Earning Potential and Non-Wage Income.

Prospects for employment or salary increases will

vary according to the job skills, work history and

career ladder of the individual. For example, an

individual hired in an intern or training slot

could be reasonably certain of sizeable salary

increases over the next few years, where an

individual with skills

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9/948-18

4330.1 REV-5

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limited to traditionally lower paid jobs often

could not expect as much increase in income in the

future.

Where a person is presently out of work and is not

suffering from any disability that will prevent

reemployment, and is seeking work, all doubts as

to future employability should be resolved in

his/her favor. In addition, it should be

recognized that there are cases where non-wage

income (such as public assistance, retirement,

etc.) is sufficient to enable the mortgagor to pay

the mortgage in full.

(5)Household Composition. Both the income and

expenses of the household will change as members

are added to or leave the household. Living

expenses may decrease as teenage children leave

home or increase as new members are added. Income

may decrease as children reach the legal adult age

and Aid for Dependent Children or social security

payments are terminated; conversely, income could

increase as these members remain in the household

and obtain full-time jobs.

(6)Income From a Third Party. In evaluating a

mortgagor\'s ability to pay, the mortgagee may

recognize income pledged to the mortgagor by a

third party provided the third party can

reasonably be expected to meet his/her pledge and

the third party gives the mortgagee a written

statement of the terms of his/her commitment. The

statement need not be a formal or a legally

binding document.

B.Mortgagee Decisions. Except in those cases discussed in

Paragraph C3 below, the mortgagee or its servicer must decide

prior to initiating foreclosure whether to request that HUD

accept assignment of the mortgage in order to avoid the

foreclosure. (See Paragraph 7-11A1.)

The mortgagee shall evaluate each of the eligibility criteria

separately and shall document its conclusions. Since criteria 1

and 2 are prerequisites to foreclosure and since HUD has the

authority to waive criteria 3 and

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8-199/94

4330.1 REV-5

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4, the mortgagee shall decide whether to request an assignment

based primarily upon its evaluation of criteria 5 and 6. The

mortgagee should merely document its findings on criteria 3 and

4\.

If the mortgagee determines that criteria 1, 2, 5 and 6 are met,

the mortgagee must request that HUD accept an assignment and must

proceed as directed in Paragraph Cl below.

If the mortgagee determines that criteria 5 or 6 are not met, the

mortgagee shall proceed as directed in Paragraph C2 below.

C.Notice To Mortgagors And HUD. Except for cases discussed in

Paragraph C(3) below, mortgagees must notify the mortgagor by

sending HUD Letter #1 and must allow the mortgagor at least 7

calendar days to complete and return the Form HUD-92068F

(Appendix 29). The mortgagee must also allow the mortgagor to

submit any other information that might demonstrate his/her

eligibility for assignment (also see Paragraph 7-7H).

NOTE:Mailing Requirements. The HUD assignment letters must

be sent by regular mail service. If the mortgagee

elects to use special mailing (i.e., Registered or

Certified) the costs must be absorbed by the mortgagee

and the letters must also be sent by regular mail

service.

The mandatory wording of HUD Letter #1 is given in Appendix 26.

The local Field Office need not receive a copy of the HUD Letter

#1 at this stage of processing.

Upon receipt of the Form HUD-92068F, the mortgagee must analyze

the case file, determine if the case meets the criteria for

assignment and must decide whether to request that HUD accept an

assignment on that case.

Should the mortgagor fail to return the Form HUD-92068F requested

in the mortgagee\'s HUD Letter #1, the mortgagee must evaluate the

assignment criteria using all available information collected

during previous contacts and shall send either HUD Letter #2 or

3, as appropriate.

1.When the mortgagee decides to request that HUD accept an

assignment, the mortgagee must notify both the local HUD

Field Office and the mortgagor. The notice to the mortgagor

shall include the exact

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9/948-20

4330.1 REV-5

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wording in its entirety as shown in HUD Letter #2 (Appendix

27).

The notification to the local Field Office shall be in the

form of a letter requesting the assignment and shall be

accompanied by the following:

a.a fully completed Form HUD-92206, Background Data on

Request for Assignment of Mortgage to HUD, (Appendix

30);

b.a copy of Form HUD-92068F (Appendix 29) completed by

the mortgagor;

NOTE:Should the mortgagor fail to complete Form

HUD-92068-F, the mortgagee must include a

statement on this form to that effect.

c.a copy of HUD Letters 1 and 2 to the mortgagor required

by this paragraph and Paragraph C1 above;

d.a copy of the ledger record or payment record card

reflecting the payment history for the 12 months prior

to the oldest unpaid installment on the account or

since the indebtedness was assumed by the present

mortgagor (if this date is more recent);

e.copies of all related collection records covering the

same time period as in Paragraph d. above and

documenting the efforts of the mortgagee\'s staff to

collect the debt and the mortgagor\'s reactions to those

efforts;

f.a copy of the Mortgage Insurance Certificate;

g.documentation that a comprehensive management review

was completed (i.e., foreclosure review committee

checklist) and mortgage holder\'s approval to foreclose;

and a copy of the management review checksheet for the

Assignmen Program process. (See Paragraph 7-11A4

NOTE.)

h.on Section 235 mortgages only, copies of all income

verifications, the copies of the last two required

recertifications (Forms HUD-93101 (Appendix 31) and

93101-A (Appendix 32)\] and Form HUD-93114 (Appendix

33), Notice of

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8-219/94

4330.1 REV-5

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Suspension, Termination or Reinstatement of Assistance,

if applicable.

2.When the mortgagee decides not to request that HUD accept

assignment, the mortgagor shall be notified of the decision

by a letter including the mandatory exact wording in its

entirety as shown in HUD Letter #3 of Appendix 28. The

mandatory letter must:

a.include a statement that the mortgagee has decided to

foreclose and has decided not to request that HUD

accept the assignment;

b.state specific criterion (criteria) not met using the

mandatory exact wording in Paragraph 8-7A5 and

Paragraph 8-7A6;

c.state the facts and reasoning relied upon in reaching

the decision that the criteria were not met;

d.describe the mortgagor\'s right to request that HUD

accept the assignment;

e.give a brief, but clear, explanation of the effect of

assignment;

f.specify the 15-day time limit within which the

mortgagor must act; and

g.advise the mortgagor to seek legal or professional

assistance if he/she does not understand his/her rights

and obligations.

3.If a mortgagee initiates foreclosure without sending the

mortgagor the notices required above, the Field Office shall

indicate to the mortgagee that it has violated the

assignment procedure and shall direct the mortgagee to stay

the foreclosure action. Where necessary, the Field Office

shall take steps to ensure that foreclosure does not proceed

until the assignment processing is completed.

The mortgagee may foreclose without sending the mortgagor

the letters discussed in Paragraphs 8-7C1 and 8-7C2 above

only when one or more of the following circumstances exists;

(The mortgagee\'s

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9/948-22

4330.1 REV-5

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case file must clearly document that these conditions

exist.)

a.the mortgaged property has been abandoned, or has been

vacant for more than 60 days;

b.the mortgagor, after being clearly advised of the

options available for relief, has clearly stated in

writing that he/she has no intention of fulfilling

his/her obligation under the mortgage; and/or

c.the mortgaged property is not the mortgagor\'s principal

residence and it is occupied by tenants who are paying

rent, but the rental income is not being applied to the

mortgage debt.

d.the property is owned by a corporation or partnership.

4.Spanish Language Warning. The notices required by

Paragraphs 8-7C1 and 8-7C2 shall contain a warning to

Spanish-speaking mortgagors to have the notice translated.

Mortgagees which are aware of other non-English speaking

mortgagors should provide the warning in the native language

of that mortgagor, in addition to the required Spanish

language warning.

NOTE:These warnings are mandatory, must be placed at

the top of the letter and must be quoted verbatim.

The warnings to be used are as follows:

a.Appendix 26 - HUD Letter #1 Warning

(1)Spanish Translation of HUD Letter #1 Warning

ESTA NOTIFICACION ES DE SUMA IMPORTANCIA, PUES

AFECTA SU DERECHO A CONTINUAR VIVIENDO EN SU CASA.

SI NO COMPRENDE EL CONTENIDO, DE ESTA CARTA,

OBTENGA UNA TRADUCCION INMEDIATAMENTE. SI USTED

NO RESPONDE DENTRO DE SIETE (7) DIAS A PARTIR DE

LA FECHA DE ESTA NOTIFICACION, USTED PUEDE PERDER

SU CASA EN EL FUTURO.

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8-239/94

4330.1 REV-5

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(2)English Translation of HUD Letter #1 Warning

THIS NOTICE IS EXTREMELY IMPORTANT BECAUSE IT

AFFECTS YOUR RIGHT TO CONTINUE LIVING IN YOUR

HOME. IF YOU DO NOT UNDERSTAND THE CONTENTS,

OBTAIN A TRANSLATION IMMEDIATELY. IF YOU DO NOT

RESPOND WITHIN SEVEN (7) DAYS OF THIS NOTICE, YOU

COULD LOSE YOUR HOME IN THE FUTURE.

b.APPENDIX 27 - HUD Letter #2 Warning

(1)Spanish Translation of HUD Letter #2 Warning

ESTA NOTIFICACION ES DE SUMA IMPORTANCIA, PUES

AFECTA SU DERECHO A CONTINUAR VIVIENDO EN SU CASA.

SI NO COMPRENDE EL CONTENIDO, DE ESTA CARTA;

OBTENGA UNA TRADUCCION INMEDIATAMENTE.

(2)English Translation of HUD Letter #2 Warning

THIS NOTICE IS EXTREMELY IMPORTANT BECAUSE IT

AFFECTS YOUR RIGHT TO CONTINUE LIVING IN YOUR

HOME. IF YOU DO NOT UNDERSTAND THE CONTENTS,

OBTAIN A TRANSLATION IMMEDIATELY.

c.APPENDIX 28 - HUD Letter #3 Warning

(1)Spanish Translation of HUD Letter #3 Warning

ESTA NOTIFICACION ES DE SUMA IMPORTANCIA, PUES

AFECTA SU DERECHO A CONTINUAR VIVIENDO EN SU CASA.

SI NO COMPRENDE EL CONTENIDO DE ESTA CARTA OBTENGA

UNA TRADUCCION INMEDIATAMENTE. SI USTED NO

RESPONDE A HUD AL ( ) \_\_\_\_\_\_\_\_ DENTRO DE QUINCE

\(15\) DIAS A PARTIR DE LA FECHA DE ESTA

NOTIFICACION, USTED PUEDE PERDER SU CASA EN EL

FUTURO.

(2)English Translation of HUD Letter #3 Warning

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9/948-24

4330.1 REV-5

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THIS NOTICE IS EXTREMELY IMPORTANT BECAUSE IT

AFFECTS YOUR RIGHT TO CONTINUE LIVING IN YOUR

HOME. IF YOU DO NOT UNDERSTAND THE CONTENTS,

OBTAIN A TRANSLATION IMMEDIATELY. IF YOU DO NOT

RESPOND TO HUD AT (\_\_\_) \_\_\_\_\_\_\_ WITHIN FIFTEEN

\(15\) DAYS OF THE DATE OF THIS NOTICE, YOU COULD

LOSE YOUR HOME IN THE FUTURE.

5.Spanish Speaking Staff. Should there be a Spanish speaker

on the staff, it would be prudent to have that person proof

read all Spanish text after final typing. A typographical

error could occur when a foreign language is being copied by

someone who is not familiar with the language, which could

change the entire meaning of the warning.

If a member of the staff is fluent in Spanish, his/her

telephone number may be given to help the mortgagor in the

translation by adding to each HUD Letter Warning the

following sentence:

LA TRADUCCION LA PUEDE OBTENER LLAMANDO SR(A) \_\_\_\_\_ AL

TELEFONO (\_\_\_\_)\_\_\_\_\_\_\_\_\_\_\_\_.

English Translation:

THE TRANSLATION CAN BE OBTAINED BY CALLING \_\_\_

\_\_\_(name)\_\_\_\_ AT THIS TELEPHONE NUMBER (\_\_\_\_)
\_\_\_\_\_\_\_\_\_.

D.Time Limits. All time limits for the sending of required notices

(letters) and for mortgagor\'s required responses shall be deemed

to be calendar days, unless otherwise expressly stated.

NOTE:If the last day for sending any letter, performing any

act or making any response falls on a Saturday, Sunday

or legal holiday, the last day for sending such notice,

doing such act or making such response shall be the

next following regular working day.

Because of the time frames involved in the HUD

assignments, mortgagees must mail the HUD letters the

same day that they are dated in order to provide

sufficient time for the mortgagor to respond. This

procedure is imperative when sending the HUD 3 Letter.

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8-259/94

4330.1 REV-5

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E.HUD Field Office Processing. Once a mortgagee has notified a

mortgagor that it intends to foreclose and does not intend to

request that HUD accept an assignment of the mortgage, the

mortgagor has 15 calendar days in which to request that HUD

accept assignment of the mortgage. During this period of time

the mortgagee must withhold foreclosure.

1.If the mortgagor responds within this time period, the local

Field Office will:

a.direct the mortgagee to delay the initiation of

foreclosure while it considers the mortgagor\'s request;

b.ask that the mortgagee provide the documentary

information identified in Paragraph 8-7C1 within 15

calendar days of the request. This information must be

accompanied by an appropriate transmittal letter

explaining the reasoning underlying any \"no\" responses

to eligibility criteria in Section D of HUD Form-92206.

Of particular interest are the mortgagees comments as

to whether (1) the default was caused by circumstances

beyond the mortgagors control, and (2) there is a

reasonable prospect that the mortgagor will be able to

resume full mortgage payments within 3 years and be

able to pay the mortgage in full by its maturity date.

c.determine if the mortgage is eligible for assignment

after reviewing the documentation received from the

mortgagee and the mortgagor as well as any other

material that may be in the case file;

d.if all criteria in Paragraph 8-7A are met and/or should

be waived (Paragraph 8-7A3 only) the mortgagee shall be

instructed to assign the mortgage to HUD. The

notification shall be in the form of an assignment

acceptance letter;

e.if all criteria in Paragraph 8-7A are not met and/or

should not be waived (Paragraph 8-7A3 only) the

mortgagor shall be notified in writing of the final

decision;

f.the mortgagee will be notified by copy of the final

decision letter it may proceed with foreclosure; or

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9/948-26

4330.1 REV-5

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g.return the case to the mortgagee for further servicing

where warranted.

2.Should the mortgagor fail to complete any specified action

within the required time limit, the Field Office shall:

a.notify the mortgagee, in writing, that it may proceed

with foreclosure; and

b.send the mortgagor a copy of the letter to the

mortgagee.

3.In the event the local HUD Office makes the decision to

reopen an assignment case for \"good cause,\" mortgagees must

comply with HUD\'s request to delay foreclosure. If a

subsequent assignment or rejection takes place, the

mortgagee will be reimbursed for any foreclosure expenses

(reasonable and customary) it may be incurred. Mortgagees

will be reimbursed for additional foreclosure costs and will

be granted extensions, if appropriate.

F.General. Mortgagees must take or refrain from taking action as

directed throughout Paragraph 8-7. Field Offices will conduct

mortgage servicing reviews of a mortgagee\'s operation to assure

that mortgagees comply with respect to HUD\'s assignment

procedures (also see Paragraphs 1-2 and 8-7G).

NOTE:When a mortgagee demonstrates (1) a pattern of

noncompliance with HUD\'s assignment program

requirements, or (2) whenever a mortgagee refuses to

abide by HUD\'s direction to assign, or (3) to refrain

from foreclosure, acquisition, and/or dispossession

pending HUD\'s determination as to whether an assignment

will be accepted, the local Field Office shall

recommend appropriate sanctions to the Deputy Assistant

Secretary for Single Family Housing.

These sanctions may include, but not necessarily be

limited to, the suspension or withdrawal of the

mortgagee\'s approval to participate in HUD\'s mortgage

insurance programs. Severity of penalty will be based

on seriousness of the infraction (see 24 CFR 25.5).

The Office of Single Family Housing in Headquarters

will review the recommendations made by

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8-279/94

4330.1 REV-5

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the local Field Office and either intervene to secure

correction or prepare a recommendation to the Mortgagee

Review Board (24 CFR 203.7(e)).

1.Return for Further Servicing. HUD may determine it is

appropriate to return cases for further servicing. Some

examples would be:

a.a violation of regulations that has materially caused

or added to the default, such as: improper handling of

tax escrows; Section 235 subsidy; violations of the

regulations or guidelines pertaining to the return of

partial payments, or

b.a violation such as: failure to have a management

review; improper determination to foreclose; or

permission to grant foreclosure by the mortgage holder

(if the holder and the servicer are not one and the

same), or

NOTE:under a and b above, the local Field Office must

return the entire Assignment Request back to the

mortgagee to be properly resubmitted and serviced

before the package is considered for the

Assignment Program process.

c.a violation of other requirements such as: incomplete

documentation (i.e., an Assignment Request Package

improperly or not signed by an authorizing official),

failure to provide checklists or other required

documentation to be submitted with the Assignment

Request is incomplete.

NOTE:under c above, the local Field Office may return

the entire Assignment Request back to the

mortgagee to be properly resubmitted and serviced

before the package is considered for the

Assignment Program process.

Field Offices will specify the corrective action the

mortgagee must take. Mortgagees may not institute

foreclosure or issue new assignment letters until such

corrective action has been completed.

2.Initiation of Foreclosure. After the date of notice that

HUD is considering assignment,

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9/948-28

4330.1 REV-5

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mortgagees shall not initiate any action leading to

foreclosure of the mortgage.

The only time it is proper for the mortgagee to initiate

foreclosure is:

a.when the property has been abandoned or vacant for more

than 60 days; or

b.after 20 days from the date of its notice to the

mortgagor (i.e., the letter from the mortgagee

notifying the mortgagor that it does not intend to ask

HUD to consider the mortgage for assignment) and the

mortgagee has not received notice from HUD that the

mortgagor has contacted HUD and requested the Secretary

to accept assignment of the mortgage (also see

Paragraph 8-7A1b); or

c.when the mortgagee is advised by HUD that the mortgagor

has failed to take a prescribed action within the time

required; or

d.when the mortgagee is advised by HUD that it has made a

final decision not to accept assignment of the

mortgage; or

e.when the mortgagor, after being clearly advised of the

options available for relief, has stated, in writing,

that he/she has no intention of fulfilling his/her

obligation under the mortgage; or

f.the mortgagor owns two or more properties that are

occupied by tenants who are paying rent but, with

respect to the mortgage under review, the rental income

is not being applied to the mortgage payments.

G.Mortgagee Servicing. The adequacy or appropriateness of the

mortgagee\'s servicing before the decision to foreclose is not a

valid basis on which HUD can reject assignment of a mortgage.

HUD will review the servicing of each case presented to it, and

will evaluate the degree to which the mortgagee\'s actions have

complied with the letter and spirit of the requirements imposed

by the HUD regulations and this handbook.

Patterns of noncompliance will be handled as described in

Paragraph 8-7F1 and Paragraph 1-2. If it appears

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8-299/94

4330.1 REV-5

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that the account might be brought current if the mortgagor is

afforded additional relief which does not impose an undue burden

on the mortgagee, HUD may suggest that the mortgagee grant that

additional relief before a final decision is made to accept or

reject the assignment.

Mortgagees are not required to accept such requests from HUD and

are free to propose alternative forms of additional relief. When

a mortgagee disagrees that it is appropriate for it to grant

additional relief, the reason for that disagreement should be

pointed out by the mortgagee when it announces its decision to

HUD.

When the mortgagee agrees to HUD\'s request and the additional

relief provided enables the mortgagor to reinstate the account,

any subsequent default must be treated as a new default. Once

reinstatement has occurred, the mortgagee must comply with the

assignment program requirements to the same extent as if the case

had never been in default before.

If the additional relief fails to bring about the reinstatement

of the mortgage, the mortgagee shall so advise HUD and HUD shall

reopen the assignment case. The mortgagee need not send any

additional notifications to the mortgagor but must withhold from

foreclosing until notified by HUD that a final decision has been

made not to accept assignment of the mortgage.

HUD shall resume processing at the point at which it was

interrupted for consideration of additional relief by the

mortgagee. Examples of reopening cases at various stages of

processing are given below:

Example #1

Scenario:HUD had notified the mortgagor of a preliminary

negative decision and had given him/her 15 days to ask

for a conference. Before the conference was requested

or held, the mortgagor and the mortgagee agreed on a

payment plan. Subsequently the payment plan was

broken. Therefore, the mortgagee would do the

following:

Action Required: The mortgagee would notify the local Field Office that

the payment plan had been broken.

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9/948-30

4330.1 REV-5

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The Field Office would then send another preliminary

review letter to the mortgagor and give him/her another

15 days to request a conference.

Example #2

Scenario:Using the scenario in Example #1, if HUD had held a

conference but had not announced a final decision prior

to returning the case to the mortgagee and the

additional relief failed to reinstate the account, the

mortgagee would do the following:

Action Required: The mortgagee would notify the local Field Office that

the payment plan had been broken. The Field Office

would then once again review the case file and announce

a final decision.

If all criteria had been met (or waived), HUD would

then accept the assignment.

If one or more of the criteria had not been met (or

waived), HUD would then reject the assignment, convey

its findings and reasoning, in writing, to the

mortgagor and authorize the mortgagee to proceed with

the foreclosure.

Example #3

Scenario:Using the scenario in Example #1, if HUD had announced

a final decision before the mortgagee agreed to give

additional relief, then the mortgagee should do the

following:

Action Required: The mortgagee would notify the local Field Office that

the payment plan had been broken. The final decision

made previously by HUD would stand.

If HUD\'s previous decision was to reject the

assignment, the mortgagee would only need to notify HUD

that the payment plan had been broken and that the

mortgagee was proceeding with the foreclosure action.

No additional HUD processing would be necessary.

If HUD\'s previous decision was to accept the

assignment, HUD would then accept the assignment.

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8-319/94

4330.1 REV-5

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H.Assigning Mortgages. 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)).

Credit Bureau Reporting. Mortgagees must not report any case to

a credit reporting agency where HUD determines that the case is

eligible for mortgage assignment.

1.On the date the assignment is filed for record,

a.submit the title evidence to the local HUD Office,

Attention: 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, Attention:

Single Family Loan Management Branch (24 CFR 203.351).

2.Follow outstanding instructions for preparation and

submission of assignment claims. For your information, a

copy of the assignment acceptance letter is included in

Appendix 34.

3.Unpaid interest, accrued at the mortgage rate from the date

of the last completely paid installment to the date the

assignment is recorded, will be included in the mortgagee\'s

claim unless more than 30 days have elapsed between the date

of HUD\'s authorization to assign (Appendix 34) and the date

the assignment is recorded.

8-8ASSIGNMENT OF DEFAULTED MORTGAGES ON PROPERTIES LOCATED IN INDIAN

RESERVATIONS (National Housing Act, Section 248; (24 CFR 203.350,

203.604). HUD will accept assignment of any mortgage insured pursuant

to Section 248 of the National Housing Act if the mortgagee submits

documentation of the following conditions:

A.the mortgage has been in default for more than 90 days;

B.the mortgagee has had a face-to-face interview with the

mortgagor, or made a reasonable effort to arrange such a meeting,

before three (3) full monthly installments due on the mortgage

are unpaid (i.e., if the default occurred in a repayment plan

arranged other than in a personal interview, the mortgagee has

had a face-to-face

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9/948-32

4330.1 REV-5

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interview with the mortgagor, or made a reasonable effort to

arrange such a meeting within 30 days after such default, and at

least 30 days before requesting assignment);

1.a face-to-face meeting is not required if:

a.the mortgagor does not reside in the mortgaged

property; or,

b.the mortgagor has clearly indicated that he or she will

not cooperate in the interview; or,

c.the mortgagee has entered into a repayment plan

consistent with the mortgagor\'s circumstances to bring

the mortgage current, thus making a meeting

unnecessary, and payments under that agreement are

current; or,

d.a reasonable effort to arrange a meeting has not

succeeded.

2.a reasonable effort to arrange a face-to-face meeting shall

consist at a minimum of all of the following:

a.one telephone call to the mortgagor for the purpose of

trying to arrange the interview;

b.one letter sent by certified mail to the mortgagor for

the purpose of trying to arrange the interview;

c.one trip by the mortgagee, its servicer, or a branch

office of either, to see the mortgagor at the mortgaged

property for the purpose of trying to arrange the

interview; and

d.the mortgagee may appoint an agent to perform its

responsibilities under this subsection.

C.the mortgagee has also:

1.informed the mortgagor that HUD may make information

regarding the status and payment history of the mortgagor\'s

loan available to local credit bureaus and prospective

creditors;

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8-339/94

4330.1 REV-5

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2.informed the mortgagor of any other available assistance;

3.notified the mortgagor that if the mortgage remains in

default for more than 90 days, the mortgagee will request

HUD to accept assignment of the mortgage;

4.notified the mortgagor of the qualifications for forbearance

relief from the mortgagee, if any, and that forbearance

relief may be available from HUD if the mortgage is

assigned; and

5.informed the mortgagor of the names and addresses of HUD

officials to whom further communications may be addressed.

8-9AUTOMATIC ASSIGNMENT OF MORTGAGES PURSUANT TO SECTION 221(g)(4) OF
THE

NATIONAL HOUSING ACT.

Pursuant to Section 221(g)(4) of the National Housing Act, as amended,

mortgagees have the option to assign (transfer) single family

mortgages insured under Section 221 when such are not in default at

the expiration of the twentieth anniversary of the date of the

mortgage was endorsed for insurance. Such mortgages are easily

identified by the 3 digit suffix code at the end of the FHA case

number. Suffix codes are: 221, 321, 521, 721, 224, 324, 524, 223,

323, 523, 205, 305, 505, 204, 304, 504, 273, 373, 573, or 773 and may

also be identified with (d)(2), (h), (i) or (e) after the suffix code

(i.e., 221(d)(2), 321(h), etc.). Mortgagees have one year from this

anniversary date to simultaneously file for record a mortgage

assignment and submit a single family insurance claim. No extension

of time will be granted for exercising this option. (For further

claim instructions, see HUD Handbook 4330.4, FHA Single Family

Insurance Claims.) Mortgages which are ineligible for this option

are: (1) those where a commitment was issued on or after December 1,

1983; and (2) where GNMA was or is the holding mortgagee on or after

April 1, 1984. (See 24 CFR 221.255, and the Federal Register, Volume

49, No. 98, May 18, 1984, Rules and Regulations, page 21048.)

Mortgagees shall discontinue sending HUD the Notice of Intent to

Assign 221(g)(4) mortgages.

A.Mortgagees who exercise this option must complete the following

actions prior to the (expected) filing date which is the date

that the mortgagee simultaneously files the mortgage assignment

in the Secretary\'s name

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9/948-34

4330.1 REV-5

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with the local recording authority and submits the claim to HUD:

1.Send APPENDIX 35 to the mortgagor at least 60 days prior to

the filing date. (See Appendix 35.)

2.Send APPENDIX 36 to the mortgagor confirming that the

mortgage will be assigned to HUD. Appendix 53 must be sent

by the earliest of the following two dates: at least 15

days prior to the filing date or at least 15 days prior to

the first mortgage payment due HUD which will occur after

the filing date. (See Appendix 36.)

3.Notify, at least 15 days prior to the filing date, all third

parties, such as, taxing authorities and the insurance

carriers for the hazard, flood, life, health and disability

coverage, that the mortgagor will be responsible for the

payment of tax bills and insurance premiums. HUD WILL NOT

ESCROW FOR ANY ITEM FOR A 22l(g)(4) MORTGAGE.

B.Hazard/Flood Insurance. HUD requires the mortgagor to have

adequate hazard and flood insurance coverage even though HUD does

not escrow for the premium, therefore, to assure that the initial

coverage is in effect, the mortgagee must follow these specific

instructions.

NOTE:DO NOT CANCEL THE HAZARD OR FLOOD INSURANCE CONTRACT

UNDER ANY CIRCUMSTANCE.

1.Instruct the hazard and flood insurance carrier to

substitute as the beneficiary in the mortgagee clause the

following: \"Secretary of Housing and Urban Development, his

successors and assigns, in care of (insert the name and

address of local HUD Office)\".

2.Ensure that the hazard or flood insurance contract will be

in effect for a period of at least 90 days beyond the filing

date. If less than 90 days, the mortgagee must contact the

insurance carrier and request a renewal of the insurance

contract. See 3 (below) for further instructions.

3.Pay from the escrow account any bill that represents an

escrow item and which is received on or by the filing date.

These payments must be posted to the mortgage account prior

to the completion of the claim (Form HUD-27011). Any bill

which is received

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8-359/94

4330.1 REV-5

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after the filing date must be sent to the mortgagor for

payment.

4.Send the insurance contract or policy (original) to the

local HUD Office per outstanding claim procedures.

5.Mortgagees must adhere to the outstanding claim procedures

when completing the claim package (copy of the Mortgage

Assignment Document which is filed for recordation, Form

HUD-27011 and required documentation) to HUD. This package

must be submitted to HUD in its entirety on the filing date.

6.Send a check to the mortgagor which represents the total

amount of the escrow account. The check should be received

by the mortgagor no later than 10 days after the claim is

submitted.

C.The mortgagee must ensure that the mortgage assignment document

which is filed for record is sent to the local HUD Office after

recordation.

Also, the title evidence which is required by the claim

instructions must be a part of the claim package which is sent to

the local HUD Office. DO NOT SEND THE TITLE EVIDENCE SEPARATELY.

The title Approval Letter which is sent to the mortgagee by local

office must be incorporated into the claim audit file.

D.Mortgagees who elect to continue servicing mortgages insured

under Section 221(g)(4) after the 20th anniversary date of

endorsement must follow the normal assignment procedures if the

account goes into default.

Mortgages which go into default before the 20th anniversary date

must also be given the normal assignment procedures.

8-10FORBEARANCE RELIEF THROUGH REAPPLICATION OF PREPAYMENTS. A mortgagor

who has made partial prepayments to principal may, at some future

time, require forbearance relief. In these situations, the mortgagee

may permit a reapplication of the prepaid sums to monthly payments to

prevent a delinquency. The mortgagee should ensure that, when regular

monthly payments are resumed, the remaining outstanding principal

balance is one which will be completely amortized over the remaining

life of the mortgage. This determination can be made from the

Outstanding Principal Balance Tables in Form 2025, Amortization

Insurance Premium

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9/948-36

4330.1 REV-5

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and Outstanding Principal Balance Tables, copies of which are

available upon request from a local HUD Field Office.

8-11FORBEARANCE AND RECASTING - MORTGAGE INSURANCE PREMIUMS (MIP).

Whether the premium is paid in a lump sum at closing (one time MIP) or

paid periodically (monthly MIP), the National Housing Act requires

that the amount of MIP be based on the scheduled unpaid principal

balances without taking into consideration deliquencies or

prepayments.

NOTE:Mortgage insurance premiums are not affected by the

mortgagee voluntarily withholding foreclosure, entering into

a special forbearance agreement, or recasting a mortgage.

Premium billings from HUD will continue to be based on the

original terms of the mortgage without modification and will

cease on the original maturity date of the mortgage.

When the mortgage is recast to extend its term or when a

forbearance agreement is entered into which provides for

mortgage payments coming due after the original maturity

date of the mortgage, there will be a period during which no

MIP premiums are due from the mortgagor. However, the

contract of mortgage insurance will remain in full force

until the mortgage has been paid-in-full in accordance with

the terms of the forbearance agreement. (See 24 CFR

203.261.)

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8-379/94