# Attachment 4

The following examples are provided to illustrate how the date to which
debenture interest can be claimed must be calculated. This calculation
will take into account the date the first public action to initiate
foreclosure was taken and the reporting cycle in which the action was
properly reported pursuant to 24 CFR 203.356(a). As provided in
Mortgagee Letter 97-18, mortgagees shall be considered to be in
compliance with the reporting requirement of 24 CFR 203.356(a) when the
case is properly reported to the SFDMS for the reporting cycle (or in
the following reporting cycle) in which the first public legal action
required to initiate foreclosure is taken.

If one or more time requirements have been missed, the interest
curtailment date will be the date of the earliest missed time
requirement. Mortgagees shall be responsible for "self curtailment" by
identifying the appropriate interest curtailment date on Form HUD-27011,
Item 31.

**Example 1**: Mortgagee fails to initiate foreclosure on a timely
basis.

Date of Default 09/01/2003

First public action to foreclose 04/21/2004

SFDMS reflects Status 68

for reporting cycle ending 04/30/2004

SFDMS reflects Status 45

for reporting cycle ending 10/31/2004

Date reflected in item 9

of HUD-27011 11/30/2004

Date reflected in item 10 12/28/2004

Reasonable diligence requirement for the State is six months.

In this example, the mortgagee did not initiate foreclosure within six
months of the date of default as required by 24 CFR 203.355(a). The
claim system will automatically curtail interest to March 1, 2004, six
months from the default date.

**Example 2**: Mortgagee initiates foreclosure on a timely basis but
exceeds the State reasonable diligence time frame for completing the
action without a valid, documented reason.

Date of Default 12/01/2003

First public action to foreclose 05/10/2004

SFDMS reflects Status 68

for reporting cycle ending 06/30/2004

SFDMS reflects Status 45

for reporting cycle ending 12/31/2004

Date reflected in item 9

of HUD-27011 01/31/2005

Date reflected in item 10 02/28/2005

Reasonable diligence requirement for the State is six months.

In this example, the mortgagee initiated foreclosure within six months
of the date of default as required by 24 CFR 203.355(a) and properly
reported the action to SFDMS with Status 68 within the required
reporting cycle. However, the reasonable diligence requirement for
completing the foreclosure in six months was not met. This requires a
curtailment of interest to November 10, 2004 and that date would have to
be reflected on Form HUD-27011, Item 31.

**Example 3**: A timely initiated foreclosure action is delayed by a
borrower's Chapter 7 Bankruptcy filing but the mortgagee takes more than
90 days from the date of bankruptcy filing to resolve the case through
dismissal, termination of the automatic stay or trustee abandonment of
all interest in the secured property and it is not documented that the
delay was not due to the failure of the mortgagee to timely notify its
bankruptcy attorney or by any failure of the mortgagee's attorney.

Date of Default 12/01/2003

First public action to foreclose 04/12/2004

SFDMS reflects Status 68

for reporting cycle ending 04/30/2004

Date Chapter 7 Bankruptcy filed 05/10/2004

Date reflected in item 21

of HUD-27011 09/15/2004

SFDMS reflects Status 45

for reporting cycle ending 12/31/2004

Date reflected in item 9

of HUD-27011 01/31/2005

Date reflected in item 10 02/28/2005

Reasonable diligence requirement for the State is four months.

In this example, the mortgagee initiated foreclosure within six months
of the date of default as required by 24 CFR 203.355(a) and properly
reported the action to SFDMS with Status 68 within the required
reporting cycle. However, the reasonable diligence requirement for
resolving the bankruptcy case and completing the foreclosure was not
met. The State reasonable diligence time frame for foreclosure
completion is four months and a 90-day extension is authorized for
resolving the bankruptcy case. The interest curtailment date for claim
purposes would therefore be November 10, 2004 and that date would have
to be reflected on Form HUD-27011, Item 31.

**Example 4**: A timely initiated foreclosure action is delayed by a
borrower's Chapter 13 Bankruptcy filing and the borrower subsequently
defaults on a confirmed bankruptcy plan. The mortgagee takes more than
90 days from the date plan payments become 60 days delinquent to resolve
the case through dismissal, termination of the automatic stay or trustee
abandonment of all interest in the secured property and it is not
documented that the delay was not due to the failure of the mortgagee to
timely notify its bankruptcy attorney or by any failure of the
mortgagee's attorney.

Date of Default 04/01/2003

First public action to foreclose 09/09/2003

SFDMS reflects Status 68

for reporting cycle ending 09/30/2003

Date Chapter 13 Bankruptcy filed 10/09/2003

Plan Payments Nov through Feb

> advance Default Date to 08/01/2003

Date reflected in item 21

of HUD-27011 09/10/2004

SFDMS reflects Status 45

for reporting cycle ending 12/31/2004

Date reflected in item 9

of HUD-27011 01/31/2005

Date reflected in item 10 02/28/2005

Reasonable diligence requirement for the State is five months.

In this example, the mortgagee initiated foreclosure within six months
of the date of default as required by 24 CFR 203.355(a) and properly
reported the action to SFDMS with Status 68 within the required
reporting cycle. However, the reasonable diligence requirement for
resolving the Chapter 13 bankruptcy case and completing the foreclosure
was not met. Bankruptcy plan payments, due on the first of each month,
became 60 days delinquent on April 30, 2004. The mortgagee had a maximum
of 90 days from April 30, 2004 to resolve the bankruptcy since no valid
reason for further delay was documented. Accordingly, the bankruptcy
should have been resolved no later than July 29, 2004, the total
authorized delay due to the bankruptcy was 294 days (the bankruptcy
filing date of October 9, 2003 through July 29, 2004) and the total time
frame allowed for meeting the reasonable diligence requirement was the
normal foreclosure time period of five months plus 294 days. The
interest curtailment date for claim purposes would therefore be November
29, 2004 and that date would have to be reflected on Form HUD-27011,
Item 31.

**Example 5**: Mortgagee exercises reasonable diligence in completing
foreclosure but does not initiate eviction or possessory action within
thirty calendar days of foreclosure completion to qualify for extension
of the reasonable diligence time frame (Acquiring Possession, page 2,
paragraph 1).

Date of Default 12/01/2003

First public action to foreclose 05/10/2004

SFDMS reflects Status 68

for reporting cycle ending 06/30/2004

Foreclosure Completion Date 10/27/2004

Possessory Action Initiated 12/15/2004

Date reflected in item 9

of HUD-27011 01/20/2005

Date reflected in item 10 02/16/2005

Reasonable diligence requirement for the State is six months.

In this example, the mortgagee met the reasonable diligence requirements
for initiating, reporting and completing the foreclosure action.
However, action to acquire possession of the property was not initiated
within thirty calendar days of foreclosure completion. This requires a
curtailment of interest to November 26, 2004, the date by which
possessory action should have been initiated, and that date would have
to be reflected on Form HUD-27011, Item 31.

**Example 6**: Mortgagee fails to convey the property to HUD within
thirty calendar days of acquiring possession and marketable title as
required by 24 CFR 203.359.

Date of Default 12/01/2003

First public action to foreclose 05/10/2004

SFDMS reflects Status 68

for reporting cycle ending 06/30/2004

SFDMS reflects Status 45

for reporting cycle ending 10/31/2004

Date reflected in item 9

of HUD-27011 12/29/2004

Date reflected in item 10 02/28/2005

Reasonable diligence requirement for the State is six months.

In this example, the mortgagee exercised reasonable diligence in
prosecuting the foreclosure to completion and in acquiring title to and
possession of the property. However, it did not meet the requirement to
convey the property to HUD within thirty calendar days of acquiring
possession and marketable title as required by 24 CFR 203.359. This
requires a curtailment of interest to January 28, 2005 and that date
would have to be reflected on Form HUD-27011, Item 31.