III.A.2.u. Deficiency Judgments (03/14/16)

Owned by Kacey Olson
Nov 25, 2018
2 min read

© HUD Single Family Housing Policy Handbook 4000.1

Where the mortgaged Property is sold at the foreclosure sale for less than the unpaid balance of the debt, HUD may seek a deficiency Judgment, unless prohibited by the terms of the Mortgage.

Included in this section are:

i. HUD-required Deficiency Judgments

ii. Procedures for Claims Without Conveyance of Title

iii. Assignment of Judgments

i. HUD-required Deficiency Judgments

(A) Mortgages Insured On or After March 28, 1988 For Mortgages insured pursuant to Firm Commitments issued on or after March 28, 1988, or pursuant to direct endorsement processing when the Mortgagee’s underwriter signed the credit worksheet on or after March 28, 1988, HUD may require the Mortgagee to pursue a deficiency Judgment. Where HUD requires the Mortgagee to pursue a deficiency Judgment, HUD will provide the Mortgagee with instructions and with its estimate of the FMV of the Property, less adjustments. Upon receipt of such notification, the Mortgagee must:

  • tender a bid at the foreclosure sale in that amount; and
  • attempt, in accordance with state law, to obtain a deficiency Judgment.

(B) Mortgages Insured Before March 28, 1988 For Mortgages insured pursuant to Firm Commitments issued before March 28, 1988, or pursuant to direct endorsement processing when the Mortgagee’s underwriter signed the credit worksheet before March 28, 1988, HUD may request the Mortgagee to pursue a deficiency Judgment.

ii. Procedures for Claims Without Conveyance of Title

Unless specifically requested by FHA, the Mortgagee is not required by FHA to pursue any deficiency Judgments in connection with CWCOT procedures.

iii. Assignment of Judgments

(A) When Filing a Claim for Insurance Benefits The Mortgagee must assign deficiency Judgments to HUD and transmit the Judgment to the NSC no later than 30 Days after the Judgment was obtained, if the Mortgagee filed a claim for mortgage insurance benefits.

(B) When Not Filing a Claim for Insurance Benefits The Mortgagee may engage in Judgment collection activities if a claim for FHA insurance benefits is not filed.