IV.A.2.a. Claim Type 01 - Conveyances (09/30/16)

Owned by Kacey Olson
Nov 25, 2018
24 min read

© HUD Single Family Housing Policy Handbook 4000.1

The Mortgagee may submit a claim after conveyance of a Property to HUD through foreclosure or by Deed-in-Lieu (DIL) of Foreclosure under Claim Type 01.

Included in this section are:

i. Computation of Interest

ii. Computation of Claim Amount

iii. FHA Refinance of Borrowers in Negative Equity Positions

iv. Submission of Claim Form Parts to HUD for Conveyance Claims

i. Computation of Interest

(A) Calculating Debenture Interest

(1) Debenture Interest Rates

(a) Mortgages Endorsed for FHA Insurance after January 23, 2004For Mortgages that were endorsed after January 23, 2004, and are not Direct Endorsements, the Mortgagee must calculate debenture interest as the monthly average yield for the month in which the Default on the Mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years.

(b) Mortgages Endorsed for FHA Insurance On or Before January 23, 2004For Mortgages that were insured on or before January 23, 2004 and were not Direct Endorsements, the Mortgagee must calculate the debenture interest rate as the higher of the rates in effect on:

  • the date the Mortgage was endorsed for insurance; or
  • the date of Firm Commitment.

(c) Direct Endorsements and Coinsurance Programs

(i) Mortgages Endorsed for FHA Insurance After January 23, 2004For applications involving Mortgages originated under the Single Family Direct Endorsement Program and endorsed for FHA insurance after January 23, 2004, the Mortgagee must calculate the debenture interest rate as the monthly average yield for the month in which the Default on the Mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years.

(ii) Mortgages Insured On or Before January 23, 2004For Direct Endorsement Mortgages insured on or prior to January 23, 2004, the Mortgagee must calculate debenture interest as the rate in effect on the date the Mortgage was endorsed for insurance.

(2) Time Frames for Debenture Interest

(a) Interest up to Date of Claim Settlement

(i) DefinitionThe Date of Initial Claim Settlement is the date that HUD approves the settlement of Part A of form HUD-27011 for payment.The Date of Final Claim Settlement is the date that HUD approves the settlement of Part B of form HUD-27011 for payment.

(ii) StandardPart AProvided that the Mortgagee has met all time requirements, HUD will pay debenture interest on the unpaid principal balance from the date of Default to the date of initial claim settlement.Part BHUD will compute interest on expenditures from the date of the submission of Part B to the date of the final claim settlement.

(b) Interest up to Disbursement Date

(i) DefinitionThe Disbursement Date, as applicable to claims, is the date the Mortgagee paid for an expense.

(ii) StandardFor each Disbursement itemized on Parts C, D and E, the Mortgagee must compute the debenture interest from the latter of the Disbursement Date or date of Default, to the earlier date of when Part B is prepared or Part A’s date of interest curtailment.

(iii) Required DocumentationThe Mortgagee must enter in Item 204 (Part C) and Item 304 (Part D) the date to which interest is calculated for expenditures claimed on form HUD-27011, Part B. This will be the same date as entered in Item 104, Part B, provided no time requirement or approved extension has been missed.

(B) Calculating Interest for an Expenditure using Daily Interest Rate Factors

(1) DefinitionThe Daily Interest Rate Factor is the annual interest rate expressed as a decimal, divided by 365 (or 366 in leap years), and rounded to the fourth place to the right of the decimal, for the purpose of calculating interest on claimed expenditures.

(2) StandardThe Mortgagee must calculate the amount of interest to be claimed for an expenditure as follows:

  • identify the effective debenture interest rate based on the endorsement date of the mortgage for mortgages endorsed before January 23, 2004, or the date of Default for mortgages endorsed on or after January 23, 2004;
  • find the Daily Interest Rate Factor (see Appendix 8.c Daily Interest Rate Factor in the Claim Filing Technical Guide) corresponding to the effective debenture interest rate;
  • multiply the Daily Interest Rate Factor by the amount paid; then
  • multiply this result by the number of Days (see Appendix 8.b Julian Calendar in the Claim Filing Technical Guide) from the date paid (or Default date, if later) for each line Item to the earlier of:
    • the date in Item 104 (submission date for Part B); or
    • the date of the earliest time requirement missed (Items 204 and 304).

(3) Interest for Expenditures Before the Date of Default

(a) StandardIf the Mortgagee makes an expenditure or advance before the date of Default, the Mortgagee may only calculate debenture interest from the date of Default.HUD will not pay debenture interest on expenses prior to the date of Default.

(b) Required DocumentationWhen filing the claim, the Mortgagee must:

  • enter the date of Default in the “Date Paid” column of Parts C, D, and E; and
  • place the actual date paid in parentheses, following the description of the expenditure or advance.

(C) Calculating Interest for Default after SFB-Unemployment or Special Forbearance

(1) Standard

(a) Timeframe for Mortgage Note InterestWhen the Mortgagee files a claim for insurance benefits after a Default under a Special Forbearance (SFB) - Unemployment Agreement or Special Forbearance agreement, HUD will pay mortgage note interest for the period beginning on the due date of the last completely paid installment, up to the earliest of the following dates:

  • date of institution of foreclosure proceedings;
  • date of acquisition of title and possession by DIL of Foreclosure;
  • date the Property was acquired by the Commissioner under a direct conveyance from the Borrower; or
  • 90 Days after the date of the Default of the SFB-Unemployment Agreement or Special Forbearance Agreement; or such other date as HUD may approve in writing prior to expiration of this 90-Day period.

(b) Calculating Mortgage Note Interest using Daily Interest Rate FactorsTo obtain the amount of accrued mortgage interest due, the Mortgagee must:

  • multiply the Daily Interest Rate Factor (see Appendix 8.c Daily Interest Rate Factor in the Claim Filing Technical Guide) by the amount of the unpaid principal balance; and
  • multiply the result by the number of days from the due date of the last completely paid installment to the date selected above as the “ending date.”

(c) Time frame for Debenture InterestWhen the Mortgagee files a claim for insurance benefits after a Default under an SFB-Unemployment Agreement or SFB Agreement, HUD will pay debenture interest for the period beginning on:

  • the date of initiation of foreclosure proceedings; or
  • the date of acquisition of title by the Mortgagee or by HUD.

This debenture interest period ends on the date of the initial claim payment or the date of interest curtailment.

(d) Calculating Debenture InterestHUD will compute the debenture interest at the time of payment of Part B, using the rate in effect at the time of the mortgage Default. Where “Mortgage Note Interest” is claimed on Part B because of an SFB-Unemployment Agreement or SFB Agreement, HUD will subtract from the claim any debenture interest already paid for the same period.

(2) Interest on Claim FormThe Mortgagee must reflect the use of an SFB-Unemployment Agreement or SFB Agreement by entering the following in Item 121:

  • From: Enter the date of the last completely paid installment after all funds received under the Agreement are applied according to the terms of the Mortgage (Item 8, part A). If no Mortgage Payments were made, enter a date 30 Days before the due date of the first scheduled payment (Item 7, Part A).
  • To: Enter the earliest of the following dates:
    • the date of institution of foreclosure proceedings;
    • the date of acquisition of title and possession by DIL of Foreclosure;
    • the date the Property was acquired by the Commissioner under a direct conveyance from the Borrower; or
    • 90 Days, or such other time as approved by the Management and Marketing (M&M) contractor, following the date of the Borrower’s SFB-Unemployment Agreement or SFB Agreement failure.
  • Rate: Enter the mortgage interest rate as it appears on the mortgage Note.
  • Column C: Enter the amount of mortgage interest due.

(3) Required DocumentationThe Mortgagee must send to HUD with Part B of form HUD-27011 a copy of the:

  • Executed SFB-Unemployment Agreement or SFB Agreement; and
  • the payment history.

The Mortgagee must retain copies of these documents in the Claim Review File.

(D) Curtailment of Interest

(1) DefinitionCurtailment of Interest is the cutoff of the accrued interest calculation as of the date on which the Mortgagee fails to take a required action.The Date of Interest Curtailment is the date that the Mortgagee first failed to take a required action.

(2) StandardThe Mortgagee must self-curtail interest on Single Family claims when it fails to meet HUD’s foreclosure, reasonable diligence, or reporting time frame requirements as of the date on which the required action should have been taken.If more than one time requirement is missed and there are no applicable extensions, the Mortgagee must calculate the interest for the claim payment to the earliest missed time requirement.

(a) Failure to Timely Initiate ForeclosureThe Mortgagee must curtail interest if it fails to meet the time requirement, including applicable extensions, to initiate foreclosure, regardless of whether later payments advanced the date of Default.

(b) Failure to Give HUD Notice of ForeclosureThe Mortgagee must curtail interest if it fails to meet the time requirement to give notice to HUD of the foreclosure via SFDMS. Until the Mortgagee properly reports the foreclosure initiation, the Mortgagee must reduce its claim by an amount equivalent to 30 Days of interest for each SFDMS reporting cycle missed.

(c) Failure to Meet Reasonable Diligence Time FramesThe Mortgagee must curtail interest if it fails to meet HUD’s Reasonable Diligence Timeframes, including applicable extensions, in:

  • completing foreclosure;
  • acquiring good marketable title to and possession of the Property; and
  • if applicable, starting eviction or possessory action.

(d) Failure to Meet Time Frame to Convey to HUDThe Mortgagee must curtail interest if it fails to meet HUD’s timeframe in conveying the Property to HUD.

(3) Required DocumentationThe Mortgagee must indicate the interest curtailment date on form HUD-27011, as follows:

  • In Part A, the Mortgagee must enter the curtailment date in Item 31, ensuring that this date is before the date in Item 9. The Mortgagee must indicate in the “Mortgagee’s comments” section the reason for the curtailment.
  • When a curtailment date is entered in Item 204 Part C and 304 Part D, the Mortgagee must indicate in the “Mortgagee’s comments” section of Part B the reason for the curtailment.

The Mortgagee must retain copies of any approved extensions received from HUD in the Claim Review File.

(4) Remittance of Claim Payments for Failure to Self-CurtailIf a Mortgagee determines during its Quality Control (QC) review that it failed to self-curtail when submitting the claim, the Mortgagee must remit claim-related payments to HUD through the Claim Remittance feature in FHAC. For more information on remitting payments, see the Quick Start: Single Family Servicing Claims Processing guide.

ii. Computation of Claim Amount

The Mortgagee may claim up to 100 percent of the unpaid principal balance, plus allowable costs and debenture interest.

(A) Damage to Conveyed Properties

(1) DefinitionSurchargeable Damage is damage to a Property caused by fire, flood, earthquake, tornado, boiler explosion (for condominiums only) or Mortgagee Neglect.Mortgagee Neglect is the Mortgagee’s failure to take action to preserve and protect the Property from the time it is determined (or should have been determined) to be vacant or abandoned, until the time it is conveyed to HUD.Non-Surchargeable Damage is damage to a Property that is not Surchargeable Damage.

(2) Standard

(a) HUD-Required Repairs of Damage to the PropertyIn cases of Surchargeable Damage, HUD may require the Mortgagee to repair a Property before conveyance, and the Mortgagee may not request reimbursement for such repairs.In cases of Non-Surchargeable Damage that occurred during the time of the Mortgagee’s possession, HUD may require the Mortgagee to repair such damage before conveyance, and HUD will reimburse the Mortgagee for reasonable payments not in excess of the Secretary’s estimate of the cost of repair, less any insurance recovery.

(b) Conveyance of Property with Surchargeable DamageWhere HUD has authorized the Mortgagee to convey a damaged Property unrepaired, HUD will deduct from the mortgage insurance benefits the greater of:

  • any insurance recovery received by the Mortgagee; or
  • HUD’s estimate of the cost to repair the Property.

(c) Estimating the Recovery AmountIf the Mortgagee has not received the hazard insurance proceeds by the time of the Part A claim submission, the Mortgagee may estimate the recovery.

(d) Adjustment of Recovery AmountIf the actual recovery amount is less than the amount estimated, the Mortgagee may request reimbursement of the difference between the amount of proceeds expected and the proceeds received if both are greater than HUD’s estimate of damage.The Mortgagee is not entitled to a reimbursement if it would reduce the deduction in insurance benefits to less than HUD’s estimate of damage.

(e) Mortgagee Certification for Properties Damaged by Fire

(i) DefinitionThe Mortgagee Certification for Properties Damaged by Fire is a certification prepared by the Mortgagee in order to convey to HUD certain eligible Properties damaged by fire.

(ii) StandardWhen the Mortgagee meets all regulatory requirements for conveying a Property damaged by fire that was not covered by fire insurance at the time of the damage, or the amount of insurance coverage was inadequate to fully repair the damage, the Mortgagee must include a Mortgagee Certification at the time that a claim is filed to limit the deduction from insurance benefits to the amount of insurance recovery received by the Mortgagee, if any.The Mortgagee Certification must include the following statements:

  • at the time the Mortgage was insured, the Property was covered by fire insurance in an amount at least equal to the lesser of 100 percent of the insurable value of the improvements, or the principal balance of the Mortgage;
  • the insurer later canceled this coverage or refused to renew it for reasons other than nonpayment of premium;
  • the Mortgagee made diligent efforts within 30 Days of any cancellation or non-renewal of hazard insurance, and at least annually thereafter, to secure other coverage or coverage under a Fair Access to Insurance Requirements (FAIR) Plan, in an amount at least equal to the lesser of 100 percent of the insurable value of the improvements, or the principal balance of the Mortgage, or if coverage to such an extent was unavailable at a reasonable rate (as defined in 24 CFR § 230.379(a)(4)(i)), the greatest extent of coverage that was available at a reasonable rate;
  • the extent of coverage obtained by the Mortgagee was the greatest available at a reasonable rate, or if the Mortgagee was unable to obtain insurance, none was available at a reasonable rate; and
  • the Mortgagee performed all required Property P&P actions.

(iii) Required DocumentationThe Mortgagee must upload into P260 a copy of the Mortgagee Certification and must retain a copy in the Claim Review File.

(f) Conveyance Without Approval of Property with Unrepaired Surchargeable DamageIf a Mortgagee conveys a damaged Property to HUD without prior notice or approval, the MCM will notify the Mortgagee in writing of its Finding. Depending on the extent of the damage and the MCM’s Finding, HUD may reconvey the Property and require reimbursement for all expenses incurred in connection with such acquisition and Reconveyance, or deduct from the mortgage insurance benefits the greater of HUD’s estimate of the cost of repair or any insurance recovery.

(3) Required DocumentationThe Mortgagee must document all Surchargeable Damage and Non-Surchargeable Damage to the Property on the claim form as follows:

  • for Surchargeable Damage, mark “Yes” in Item 24, complete Items 26 and 27, and identify the damage in the “Mortgagee’s comments” section;
  • for Non-Surchargeable Damage, mark “No” in Item 24, identifying the damage in the “Mortgagee’s comments” section; and
  • include amounts of hazard insurance recovery received in Line 118 or, if adjusting the amount based on a Part A estimate, in Line 119.

(4) Failure to Indicate Damage on the Claim FormIf the Property is conveyed damaged but is not identified as damaged on form HUD-27011, HUD will make no further reimbursement until the MCM has evaluated the Mortgagee’s responsibility for the damage.

(B) Funds Held by the Mortgagee

(1) StandardHUD deducts from the mortgage insurance benefits those funds that are retained by the Mortgagee.

(2) Required DocumentationThe Mortgagee must report these held funds as follows:

  • Unapplied Section 235 Assistance Payments - Item 123, Part B, Column A.
  • Funds Held Pursuant to a Buydown Agreement - Item 109, Part B, Column A.
  • Rental Income - Item 115, Part B, Column A.
  • Hazard Insurance Recovery - Item 118, Part B, Column A, if not reported on Part A.
  • Hazard Insurance Recovery - Item 27, Part A, and Item 119, Part B, column A if the entry in Part A is an estimate.
  • All other funds - Identify the nature and the amount of the funds and enter in Item 109, Part B, Column A.

(C) Escrow Funds

(1) Funds Remaining In Escrow Account

(a) StandardThe Mortgagee must report on the claim form those funds remaining in the escrow account on the date the deed is filed for record.

(b) Required DocumentationThe Mortgagee must enter amounts for funds remaining in the escrow account in Item 109, Part B as follows:

  • The Mortgagee must include in Item 109 any funds received on the Mortgage that have not been applied to reduce the indebtedness, such as Partial Payments, hazard insurance refunds, buydown moneys, and funds held in escrow for on-site repairs.
  • For payment of expenses for which funds are escrowed, the Mortgagee must charge those payments to the escrow account until the escrow account balance equals zero.
  • The Mortgagee must not enter a negative balance in Item 109 and must not enter amounts for escrow advances in Items 305 or 311.

The Mortgagee must include in the “Mortgagee’s comments” section an explanation of the funds included in Item 109.

(2) Mortgagee Advances for Escrow Expenditures

(a) StandardThe Mortgagee may claim reimbursement advances for escrow expenditures. There must be no remaining funds in the escrow account.The Mortgagee must calculate interest on advances from the Disbursement Date to the date the claim is prepared. If there were any advances from escrow before the date of Default, the Mortgagee must calculate the interest from the date of Default.

(b) Required DocumentationThe Mortgagee must enter any advances for escrow expenditures in Items 305 or 311, as appropriate. The Mortgagee must not charge these advances to Item 109.When the first occurrence of an expense results in a negative balance to escrow, the Mortgagee must enter this amount in Item 305 or 311, whichever is appropriate.

(D) Property Preservation and Protection Costs

(1) StandardHUD will reimburse Mortgagees up to the Maximum Property Preservation Allowance, or as permitted by HUD as approved over-allowables, for Property P&P actions so long as:

  • the actions are performed before the date of conveyance, even if the Mortgagee renders payment after conveyance; and
  • the actions are performed in accordance with HUD guidance.

See Appendix 6.0 – Maximum Property Preservation Allowances (applies to Servicing only) for Maximum Property Preservation Allowances per specific action and per Property.

The Mortgagee may not request reimbursement for any costs related to obtaining bids for P&P actions.

(a) PhotographsThe Mortgagee may request a flat fee reimbursement for photographs, regardless of the number of pictures required.

(b) InspectionsThe Mortgagee may request reimbursement for costs for:

  • up to 13 inspections per calendar year per Property, with one inspection performed for each 25-35-Day cycle in accordance with HUD guidance and with additional protective measures supported by documentation;
  • Pre-Conveyance Inspections that do not coincide with the regular inspection schedule; and
  • additional inspections as otherwise required by HUD.

(c) Debris Removal

(i) StandardHUD will reimburse the Mortgagee for debris removal amounts up to the maximum amount in the P&P Cost schedule and up to amounts authorized by the MCM.

(ii) Required DocumentationThe Mortgagee must retain in the Claim Review File:

  • before and after photographs reflecting the debris removal and including the date and property address; and
  • salvage and dumping fee receipts or other documentation stating the date, property address, number of cubic yards dumped, and number and type of appliances disposed of.

(2) Required DocumentationThe Mortgagee must retain in the Claim Review File documentation supporting all property preservation expenses claimed by the Mortgagee.Where the Mortgagee was instructed by HUD to perform a specific service after the date of conveyance, the Mortgagee must include in the “Mortgagee’s comments” section of form HUD-27011 notation of the request and a list of expenses associated with completing the request.

(3) HUD Review of P&P ExpensesHUD’s MCM will evaluate all claimed costs for P&P. HUD will require the Mortgagee to repay these costs if HUD determines that:

  • amounts paid for reimbursement were unnecessary, excessive, or unsupported; or
  • services claimed were not performed or were not performed in accordance with HUD guidance.

(E) Homeowners’ Association/Condominium Assessments and Fees

(1) StandardThe Mortgagee may claim reimbursement for:

  • Homeowners’ Association (HOA)/Condominium Fees due within 30 Days after the date of conveyance to HUD and paid by the Mortgagee before conveyance;
  • penalties, interest, and/or late fees incurred by the former Borrower and paid by the Mortgagee; and
  • the fees and assessments amounts listed below.

(a) Where HOA/Condominium Fees Survived Foreclosure

(i) Fees Not Included in ForeclosureWhere HOA/Condominium Fees were not included in the foreclosure proceedings and these fees survive foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees.HUD will only reimburse the Mortgagee for payment of assessments that were incurred from the foreclosure sale date to the date of conveyance.

(ii) Fees Were Included in Foreclosure and Property is in State where HOA/Condominium Liens Can Take PriorityWhen the Property is located in a State in which HOA/condominium liens can take priority over HUD’s first lien and these fees were included in the foreclosure and survived foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees.HUD will only reimburse Mortgagees for HOA Fees up to the total value of the periodic HOA/Condominium Assessments due and paid from the date the Borrower defaulted on their HOA/Condominium Assessment to the date of conveyance.

(b) Where there is an HOA/Condominium Lien that Survives ForeclosureWhen the Property is not located in a State in which HOA/Condominium Fees can take priority over HUD’s first lien, the fees were included in the foreclosure, and there is a lien on the Property that survives foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees.HUD will only reimburse Mortgagees for HOA Fees up to the state law mandated amount.

(c) Where HOA/Condominium Fees do Not Survive Foreclosure or Create a LienWhere HOA/Condominium Fees will not survive foreclosure or create a lien surviving foreclosure, the Mortgagee may claim reimbursement for the HOA/Condominium Assessment amounts required under applicable law.

(2) Required DocumentationAfter resolving HOA/Condominium Fee amounts, the Mortgagee must perform the following in P260:

  • no later than 15 Days after conveyance, upload into P260 the paid HOA/condominium invoice and any documentation necessary to verify that the Mortgagee made such payments prior to conveyance; and
  • document in P260 any common area requirements associated with gaining access to the Property.

The Mortgagee must also reflect the amounts on form HUD-27011 as follows:

  • enter HOA/condominium amounts in Item 111 of Part B and Item 305 on Part D; and
  • document the payment of all final bills and liens for HOA/Condominium Fees in the “Mortgagee’s comments” section of Part C.

(F) Hazard Insurance PremiumsHUD will reimburse the Mortgagee for hazard insurance premiums sufficient to protect the Mortgagee’s interest up until the date the deed to the Secretary is filed for record, so long as the hazard insurance premiums were paid in accordance with HUD guidance.

(1) Calculating the Hazard Insurance Premium RefundIf the amount of the actual premium refund is not known at the time Part B of form HUD-27011 is prepared, the Mortgagee must calculate an estimate on a “short rate” basis as follows:

  • determine the number of Days the policy was in effect, from the effective date of the policy to the earlier of the cancellation date or the date the deed to the Secretary was filed for record (see Appendix 8.b Julian Date Calendar of the Claim Filing Technical Guide);
  • use the Short Rate Method Table in Appendix 8.a of the Claim Filing Technical Guideto determine the percentage of the premium utilized, and subtract this figure from 100 to determine the percentage of premium remaining; and
  • multiply the percentage of premium remaining by the total premium to determine the estimated amount of the premium refund.

(a) Actual Hazard Insurance Premium Refund More than Estimated RefundIf the actual premium return is $10 or more than the Mortgagee’s estimated amount, the Mortgagee must file a supplemental remittance.

(b) Actual Hazard Insurance Premium Less than Estimated RefundIf the actual premium return is less than the Mortgagee’s estimated refund, the Mortgagee may request a refund by:

  • filing a supplemental claim form; and
  • providing a copy of the insurance carrier’s statement of the return premium.

(2) Required DocumentationThe Mortgagee must include the refund amount or estimated refund amount in Item 109, Part B of form HUD-27011, and include in the “Mortgagee’s comments” section the amount and whether this amount is actual or estimated.

(3) Claims without Estimated Hazard Insurance Premium Refunds or Where No Refund was ReceivedThe Mortgagee may submit a Part B claim without an estimated hazard insurance premium refund, provided the Mortgagee includes documentation to HUD demonstrating:

  • that the insurer remitted the refund to the Borrower; or
  • that the insurer has a policy of not remitting funds to the Mortgagee in that jurisdiction.

If the Mortgagee submits a Part B claim with an estimated hazard insurance premium refund, but the refund was not received, the Mortgagee may submit a supplemental claim for reimbursement of the estimated hazard insurance premium refund entered on line 109 of the Part B claim, provided the Mortgagee includes documentation to HUD demonstrating:

  • that the insurer remitted the refund to the Borrower; or
  • that the insurer has a policy of not remitting funds to the Mortgagee in that jurisdiction.

(G) Utility BillsThe Mortgagee may request reimbursement for final utility bills by itemizing them in Item 305 of Part D of form HUD-27011.

(H) Eviction and Other Possessory Action Costs

(1) DefinitionEviction and Other Possessory Action Costs are those costs associated with gaining possession of an occupied Property.

(2) StandardThe Mortgagee may request full reimbursement of eviction and other possessory action costs that are:

  • required by state and local law in jurisdictions where the Mortgagee is required to bring a separate possessory action in addition to foreclosure; and
  • reasonable and customary for that jurisdiction and actually necessary to accomplish the eviction or other possessory action.

Where debris removal is required by state and local law as part of the eviction or possessory action, the Mortgagee may claim these costs as eviction costs.

HUD will not reimburse the Mortgagee for the following fees and costs:

  • fees and costs in excess of reasonable and customary fees and costs and lacking documentation supporting the amount claimed;
  • fees and costs unnecessary for the protection, acquisition, or conveyance of the Property, such as courier services, document retrieval, express mail, or property inspection by attorneys;
  • Mortgagee’s overhead items such as postage, telephone, duplication, or collection services; or
  • compensation paid to an attorney or trustee who is a salaried employee of the Mortgagee.

(3) Required DocumentationThe Mortgagee may include costs for evictions and possessory actions in Line 111 of form HUD-27011.The Mortgagee must include in the Claim Review File documentation supporting any claimed costs associated with compliance with state and local law.

(I) Tax Bills

(1) StandardThe Mortgagee may request reimbursement for all tax bills paid.The Mortgagee may not request reimbursement for late fees and/or interest penalties charged by the taxing jurisdiction for late payment of taxes.

(2) Required DocumentationThe Mortgagee must:

  • upload into P260 any documentation (such as a paid receipt, a copy of the Mortgagee’s tax payment history screen, or other documentation showing the amount paid, the purpose of the payment, and the date the payment was made by the Mortgagee) that is necessary to validate that such payment was made;
  • certify in the claim form that all tax bills due within 30 Days of conveyance are paid as of the date of conveyance;
  • document payment of tax bills in Item 32, “Schedule of Tax Information,” of Part A of form HUD-27011; and
  • retain invoices, paid bill receipts, and other documentation necessary to validate that such payment was made in the Claim Review File.

(J) Deed-in-Lieu Borrower ConsiderationTo claim the DIL Borrower Consideration after successful use of DIL in accordance with HUD policies, the Mortgagee must enter it in Item 305 as an Acquisition Cost.

(K) Attorney’s Fees

(1) Standard

(a) Up to Maximum Fee in HUD ScheduleThe Mortgagee may claim reimbursement for up to the amounts shown on the HUD Schedule of Standard Attorney Fees for fees reasonably relating to the amount of work performed for the current Default.

(b) For Amounts Exceeding the Maximum Fee and Not Provided for in HUD ScheduleFor additional expenses incurred due to required legal actions such as mediation or probate proceedings, the Mortgagee may claim reimbursement for these costs by:

  • providing a documented cost breakdown and written justification with the claim submission and retaining a copy in the Claim Review File; and
  • filing a supplemental claim for amounts above the maximum fee.

(c) Fees Relating to BankruptcyThe Mortgagee may claim reimbursement for attorney’s fees as follows:

  • up to the fee set in the HUD Schedule for costs actually incurred for each bankruptcy; or
  • reasonable and customary attorney’s fees incurred when the bankruptcy was not routine.

Mortgagees may not claim additional attorney’s fees for defending against court-ordered involuntary principal reductions (or “cramdowns”) as part of a bankruptcy, nor may Mortgagees claim fees that have already been included in a Loss Mitigation Option.

(2) Required DocumentationThe Mortgagee may claim reimbursement for attorney’s fees by entering into Part D of the initial filing of form HUD-27011 the following information:

  • Item 305, “Disbursements for HIP, taxes, ground rents and water rates (which were liens prior to mortgage), eviction costs and other disbursements not shown elsewhere,”: Enter up to the maximum fee set forth in the HUD Schedule for possessory actions.
  • Item 306, “Attorney/Trustee Fees”: Enter the amount of attorney or trustee fees actually incurred. The Mortgagee must itemize the elements of the fee if the fees exceed the amount that is HUD approved for the area.
  • Item 307, “Foreclosure and/or acquisition, conveyance and other costs”: Itemize any other legal costs paid by the Mortgagee, not including disbursements shown in Item 306. Mortgagees must not enter attorney’s fees in Item 307.
  • Item 310, “Bankruptcy”: Enter an amount up to the maximum fee set forth in the HUD Schedule for costs actually incurred for each bankruptcy and reasonable and customary attorney’s fees incurred when the bankruptcy was not routine.

(L) Foreclosure and Acquisition Costs

(1) DefinitionForeclosure and Acquisition Costs are those costs associated with the Mortgagee’s foreclosure of the Property and acquisition of good marketable title to the Property.

(2) StandardThe Mortgagee may request reimbursement for fees and costs that are:

  • necessarily incurred in foreclosure proceedings; and
  • reasonable and customary in the area.

For all Mortgages endorsed prior to February 1, 1998, HUD will reimburse the Mortgagee’s foreclosure costs at two-thirds of the foreclosure costs.

For all Mortgages endorsed on or after February 1, 1998, HUD will reimburse the Mortgagee’s foreclosure costs based on the Tier Ranking System (TRS) ranking of the Mortgagee as of the date the Part B claim is received by HUD as follows:

  • for non-Tier-1 Mortgagees, two-thirds of foreclosure costs; and
  • for Tier 1 Mortgagees, 75 percent of foreclosure costs.

HUD will not reimburse the Mortgagee for the following fees and costs:

  • fees and costs in excess of reasonable and customary fees and costs, which lack documentation supporting the amount claimed;
  • fees and costs unnecessary for the protection, acquisition, or conveyance of the Property, such as courier services, document retrieval, express mail, or property inspection by attorneys;
  • Mortgagee’s overhead items such as postage, telephone, duplication, or collection services;
  • compensation paid to an attorney or trustee who is a salaried employee of the Mortgagee; or
  • extra costs incurred in foreclosures that result from defects in the mortgage transaction or foreclosure or defects in the title existing at or before the time the Mortgage was filed for record. HUD may reimburse these costs if the Mortgage was sold by the Secretary or was executed in connection with the sale of a Property by the Secretary after August 1, 1969.

(3) Required DocumentationThe Mortgagee must reflect total foreclosure costs in Items 306, 307, and 310 of form HUD-27011. HUD will then calculate either the two-thirds or 75 percent allowance, as appropriate, for both expenses and interest.

(M) BankruptcyHUD will reimburse fees related to bankruptcy as based on the Mortgagee’s tier ranking.If there are multiple bankruptcies for a Mortgage in Default, the Mortgagee may request reimbursement for the fees and costs related to each filing.

(1) Extension for Initiation of Foreclosure

(a) StandardIf the Mortgagee is unable to initiate foreclosure due to the Borrower’s filing of bankruptcy, the Mortgagee may reflect the use of the 90-Day extension to initiate foreclosure by entering in form HUD-27011:

  • the date of the filing of the bankruptcy petition in Item 40;
  • the release date of the bankruptcy stay in Item 21;
  • a date 90 Days after the release of the bankruptcy stay, including any applicable extensions, in Item 19; and
  • the date the foreclosure action was initiated or reinitiated, if canceled due to the bankruptcy, in Item 11.

The Mortgagee must not enter an extension date in Item 19 if:

  • the Mortgagee fails to initiate foreclosure within 90 Days of the release of the bankruptcy stay; or
  • the time limit to initiate foreclosure expires before the bankruptcy petition was filed.

(b) Required DocumentationThe Mortgagee must retain in the Claim Review File:

  • dated copies of the court’s release form the bankruptcy stay;
  • copies of any demand letters or notices required by applicable state law; and
  • any approvals for extensions received by HUD.

(2) Extensions for Foreclosure CompletionIf the Mortgagee is unable to timely complete the foreclosure due to the filing of a bankruptcy petition, the Mortgagee must:

  • note the cause of the delay in the “Mortgagee’s comments” section of Part A; and
  • retain supporting documentation in the Claim Review File.

(N) Rental of the Property

(1) StandardHUD will not reimburse the Mortgagee for costs incurred solely in renting the Property prior to conveyance. If rental produces a net profit, HUD will reduce the amount of the claim by that profit.

(2) Required DocumentationIf the Mortgagee rents the Property, the Mortgagee must include on form HUD-27011:

  • any Rental Income on Item 115, Part B; and
  • rental expenses, as an offset to Rental Income, on Item 116, Part B.

(O) Section 235 Assistance Payments

(1) Unapplied PaymentsThe Mortgagee must return unearned Section 235 assistance to HUD via the Section 235 billing process. The Mortgagee must apply earned payments to the Borrower’s account in full installments to advance the date of account and report Partial Payments in Item 123 of Part B.

(2) Overpaid AssistanceFor funds that were advanced to repay overpaid Section 235 assistance to HUD and were not recovered from the Borrower, the Mortgagee must enter the unrecovered advance in Item 123, Column B, Part B.

(P) Deficiency Judgments

(1) StandardWhen HUD required the deficiency judgment action or when HUD has approved the Mortgagee’s request to pursue the Judgment, the Mortgagee may request full reimbursement of the following fees:

  • cost of reasonable and customary attorney fees which relate only to obtaining the deficiency Judgment;
  • additional filing or recording fees directly related to the deficiency Judgment; and
  • if local law required a judicial foreclosure in order to obtain a deficiency Judgment, those costs directly related to the judicial foreclosure.

(2) Required DocumentationThe Mortgagee must note costs related to deficiency Judgments in Item 410 of form HUD-27011.

(Q) Late Fees and Interest PenaltiesUnless otherwise stated specifically in this SF Handbook or otherwise authorized by HUD, the Mortgagee may not request reimbursement for late fees and/or interest penalties on escrowed items.

iii. FHA Refinance of Borrowers in Negative Equity Positions

(A) Submission of Claim to HUDFor claims for Mortgages under the FHA Refinance of Borrowers in Negative Equity Positions, or FHA Short Refinance program, the Mortgagee may file a conveyance claim and request reimbursement for all allowable Part B expenses.

(B) Submission of Claim to the Department of TreasuryAfter HUD pays the unpaid principal balance on Part A of the conveyance claim, the Mortgagee must contact the Department of Treasury’s Claims Processor at ctsclaimsprocessor@wellsfargo.com to register and submit claims for the Emergency Economic Stabilization Act (EESA) portion of the unpaid principal balance to be paid in part by the Department of Treasury. The Mortgagee may contact the Claims Processor for support at (240) 586-7700 or (866) 846-4526.

iv. Submission of Claim Form Parts to HUD for Conveyance Claims

(A) Submission of Part A

(1) To HUDThe Mortgagee must submit Part A to HUD headquarters via EDI, FHAC, or paper claim.The Mortgagee must submit Part A no later than two business days after the date the deed to HUD is filed for record or mailed to the recording authority. For paper claims submitted via mail, HUD will consider the submission timely if HUD receives these documents within 10 Days from the date listed in Item 6.

(2) To P260The Mortgagee must upload into P260:

  • a copy of Part A;
  • a copy of the deed to HUD filed for record;
  • documentation of the last tax bills paid to each taxing authority;
  • a copy of HUD’s letter approving damaged conveyance of the Property under 24 CFR § 203.379(a), if applicable;
  • the Mortgagee’s certificate that the conditions of 24 CFR § 203.379(b), relating to fire damage, have been met, if applicable; and
  • a copy of documentation that will verify that appropriate action was taken to protect and preserve the Property.

The Mortgagee must upload these documents no later than two business days after the date the deed to HUD is filed for record or mailed to the recording authority.

(B) Submission of Parts B, C, D, and E

(1) To HUDThe Mortgagee must submit Part B to HUD headquarters via EDI, FHAC, or paper claim. When submitting via paper claim, the Mortgagee must also submit Parts C, D, and E.The Mortgagee must submit Part B within the later of:

  • 45 Days after the deed was filed for record or mailed to the recording authority; or
  • 15 Days after the Title Approval Date in FHAC, if the claim was filed electronically (or 15 Days after the Title Approval Letter Date if the claim was filed manually).

The Mortgagee must retain Parts C, D, and E in the Claim Review File.

(2) To P260The Mortgagee must upload into P260:

  • Parts B, C, D, and E; and
  • required supporting documentation of amounts claimed.

The Mortgagee must upload into P260 Parts B, C, D, and E within the later of:

  • 45 Days after the deed was filed for record or mailed to the recording authority; or
  • 15 Days after the Title Approval Date in FHAC, if the claim was filed electronically (or 15 Days after the Title Approval Letter Date if the claim was filed manually).