III.A.2.p. Claims Without Conveyance of Title (03/14/16)

Owned by Kacey Olson
Nov 25, 2018
4 min read

© HUD Single Family Housing Policy Handbook 4000.1

Included in this section are:

i. Definitions

ii. Qualification Criteria for Use of Commissioner’s Adjusted Fair Market Value

iii. Property Valuation and CAFMV

iv. Independent Third-Party Providers

v. CWCOT Bidding Procedures

vi. Reporting CWCOT

i. Definitions

A Claim Without Conveyance of Title (CWCOT) is a procedure under which the Mortgagee attempts to secure a third party purchaser for the mortgaged Property so that conveyance to HUD is not required in exchange for mortgage insurance benefits.

A Competitive Sale is a CWCOT-related sale where a Mortgagee elects to use an independent third-party provider to conduct the foreclosure sale or in connection with any Post-Foreclosure Sales Efforts and where the Property is marketed for a minimum of 15 Days.

A Non-Competitive Sale is a CWCOT-related sale where a Mortgagee elects not to use an independent third-party provider to conduct the foreclosure sale or in connection with any Post-Foreclosure Sales Efforts and/or the Property is not marketed for a minimum of 15 Days.

ii. Qualification Criteria for Use of Commissioner’s Adjusted Fair Market Value

(A) Definition The Commissioner’s Adjusted Fair Market Value (CAFMV) is the estimate of the FMV of the mortgaged Property, less adjustments, which may include without limitation, HUD’s estimate of holding costs and resale costs that would be incurred if title to the mortgaged Property were conveyed to HUD.

(B) Standard Unless otherwise required by statute or jurisdiction, the Mortgagee must use the CAFMV for all foreclosure sales and Post-Foreclosure Sales Efforts for Mortgages in Default when all of the following criteria are met:

  • the FHA mortgage insurance is still active for the FHA case number;
  • the FHA-insured Mortgage is not subject to indemnification;
  • the Mortgagee has worked with the Borrower to exhaust all Home Retention Options and has determined that the Borrower’s case does not meet the criteria for a Home Disposition Option, or the Mortgagee has been unable to locate the Borrower, and the Property is vacant or has been abandoned by the Borrower;
  • the Property has no Surchargeable Damage; and
  • the Mortgagee’s projected conveyance claim amount would be equal to or greater than the CAFMV.

(C) Small Servicer Exemption

(1) Definition Small Servicers are those Servicers defined in 12 CFR 1026.41(e)(4)(ii).

(2) Standard HUD permits but does not require the use of CAFMV by small servicers.

iii. Property Valuation and CAFMV

(A) Required Appraisal Unless otherwise directed by HUD, Mortgagees must first obtain and review for accuracy an “as-is” FHA appraisal, which includes both an interior and exterior evaluation of the Property. If the Property is occupied and an interior appraisal cannot be obtained, an “exterior-only” appraisal may be used.

(1) Appraisal Validity The appraisal must be valid on the date of the foreclosure sale. Appraisals are valid for 120 Days.

(2) Extension to Appraisal Validity Period HUD provides an automatic 30-Day extension from the appraisal expiration date for delays due to bankruptcy, court delays or delays outside of the Mortgagee’s control.

(3) Required Documentation If the Property is to be conveyed to HUD, the Mortgagee must upload into P260 a copy of the appraisal used to determine CAFMV.

(B) Determining the CAFVM After determining the Property’s appraised value, the Mortgagee’s authorized employees must access the CAFMV link in FHAC to determine a Property’s CAFMV. The CAFMV remains valid and in effect for 120 Days from the date of the appraisal.

(C) Damage to the Property after Appraisal The Mortgagee must immediately notify the NSC via cwcot@hud.gov if it becomes aware of any damage to the Property after the appraisal. The NSC will provide the Mortgagee with additional instructions should damage occur.

(D) Updated Appraisals due to Postponed Foreclosure Sales If the foreclosure sale does not take place within 120 Days from the date of the appraisal, and within such additional time provided under Extension to Appraisal Validity Period, the Mortgagee must request an updated appraisal and obtain an updated CAFMV.

iv. Independent Third-Party Providers [Highlighted text below must be implemented no later than December 1, 2016]

(A) Definition An Independent Third-Party Provider is a party that conducts the foreclosure sale or additional Post-Foreclosure Sales Efforts under CWCOT procedures.

(B) Standard Mortgagees may utilize an Independent Third-Party Provider to conduct the foreclosure sale and market a Property (securing an FHA-insured Mortgage) prior to such sale, where permitted by jurisdiction. The Mortgagee must ensure that the Independent Third-Party Provider is not one of the following:

  • an Affiliate or subsidiary of the Mortgagee;
  • any Entity over which the Mortgagee has significant influence; or
  • any Entity with which the Mortgagee has a conflict of interest in fact or appearance.

For successful third-party sales, HUD will reimburse Mortgagees for Independent Third-Party Provider service fees incurred up to an amount that does not exceed 5 percent of the Property’s net sales price. Revenue sharing agreements of the reimbursed fee between the Mortgagee and the Independent Third-Party Provider are not permitted.

v. CWCOT Bidding Procedures

The Mortgagee must bid the CAFMV at the foreclosure sale.

Either the Mortgagee or a third party will be the successful bidder at the foreclosure sale. Notwithstanding the foreclosure sale, the Borrower or a third party may exercise a legal right and redeem the Property.

vi. Reporting CWCOT

If a third party purchased the Property at foreclosure through CWCOT procedures, the Mortgagee must report in SFDMS the appropriate Claim Termination of Insurance Code.