February 12, 2016
Recently the FHA and HUD updated guidance to lenders with regard to foreclosures and the “reasonable diligence” required to make sure the foreclosure action happens in a timely manner. One of the biggest complaints about the foreclosure process is how long it can take for a financial institution or the entity that is to take possession of the property to do so. The new HUD guidelines require lenders to act in a reasonable time frame.
According to mortgagee letter HUDNo.16-003, “…when foreclosure of a defaulted loan is necessary, mortgagees must exercise reasonable diligence in prosecuting the foreclosure proceedings to completion and in acquiring title to and possession of the property.
However, the mortgagee letter adds:
“When certain delays in completing foreclosure and acquiring possession are caused by circumstances beyond the mortgagees control, the mortgagee may obtain an extension to Reasonable Diligence timeframes. The period of time associated with delays in completing the foreclosure process may be excluded from the calculation of the time to complete foreclosure when HUD has granted an extension or permitted the use of an automatic extension.”
Delays can occur if the borrower and lender are in mediation, and they can also happen if there is a bankruptcy proceeding. “When a mortgagor files for bankruptcy after the initiation of foreclosure, an automatic extension of the Reasonable Diligence time frame for foreclosure and acquisition of the property are granted” if the following conditions apply:
–The mortgagee ensures that all necessary bankruptcy-related legal actions are handled in a timely and effective manner
–The case is promptly referred to a bankruptcy attorney after the bankruptcy is filed
–The mortgagee monitor s the action to ensure that the case is “timely resolved”
The FHA/HUD official site adds that certain types of bankruptcy may require different time frames. For example, for Chapter 7 bankruptcy, “HUD automatically grants an extension through the date that is 90 days after the date of the release of stay”.
In some cases, extensions may also be given if there is “separate legal action” required to gain possession of the property. “When a separate legal action is necessary to gain possession following foreclosure, an automatic extension of the Reasonable Diligence time frame will be allowed for the actual time necessary to complete the possessory action (i.e., if occupied conveyance was not approved).”
Such extensions may be granted if “the mortgagee takes the First Legal Action to initiate the eviction or possessory action” within 30 days of the completion of foreclosure proceeding, “or the expiration of federal, state or local restrictions on evictions. Upon the expiration period associated with the applicable occupancy rights, mortgagees are expected to proceed promptly with possessory actions”.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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