The FHA and HUD have updated policies related to the sales of foreclosed homes for “all defaulted FHA insured mortgages” with sales scheduled on or after 1 February 2015. According to Mortgagee Letter 2014-24, Increasing Use of FHA’s Claims Without Conveyance of Title (CWCOT) Procedures, the following guidelines will apply to those home sold after the date mentioned above:
“Unless otherwise required by statute or jurisdiction, mortgagees are to use the Commissioner’s Adjusted Fair Market Value (CAFMV) for all foreclosure sales and Post-Foreclosure Sales Efforts associated with defaulted FHA insured mortgages when all of the following criteria are met:
A.The FHA mortgage insurance is still active for the FHA Case Number;
B. The FHA-insured loan is not subject to indemnification. (Note: Items A and B may be verified by checking Neighborhood Watch);
C. The mortgagee has worked with the mortgagor to exhaust all applicable home retention loss mitigation options and has determined that the mortgagor’s case does not meet the criteria for a Pre-Foreclosure Sale (PFS) or a Deed-in-Lieu (DIL). (Mortgagees may not proceed with any foreclosure sale until this condition has been met);
D.The property has no surchargeable damage (i.e. damage caused by fire, flood, earthquake, tornado, hurricane, boiler explosion, or mortgagee neglect);
E. If the mortgagee were to file a “conveyance” claim, the mortgagee’s projected ‘conveyance’ claim amount would be equal to or greater than the CAFMV.”
These are not the only changes–other alterations include new or amended requirements for appraisals:
“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.”
“The appraisal must be valid on the date of the foreclosure sale. Appraisals are valid for 120 days. If delays such as bankruptcy, court delays or delays outside of the mortgagee’s control occur, the lender is granted an additional 30 day extension on the appraisal expiration date.”
For more information on these rule changes, contact the FHA directly at their toll-free number: 1-800 CALL FHA.
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