2DayLMTraining_5.16.pptx

Early Delinquency Servicing Activities & Loss Mitigation Program Overview HUD Handbook 4000.1, Section III Updated5/9/2016

The information in this document is current as of the Last Update date noted above. This document does not establish or modify the policy contained in FHA’s Handbooks and Mortgagee Letters in any way.

CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY

FHA’s Office of Single Family Housing Training Module

CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY

FHA’s Office of Single Family Housing Training Module FHA’s National Servicing Center

Servicing of FHA-Insured Loans

CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY

FHA’s Office of Single Family Housing Training Module FHA’s National Servicing Center In this first section, we will cover some general information on Servicing of FHA-Insured Loans.

Mortgagees must comply with all laws, rules, and requirements applicable to mortgage servicing Includes all applicable requirements under the purview of the Consumer Financial Protection Bureau (CFPB), the Real Estate Settlement Procedure Act (RESPA), and the Truth in Lending Act (TILA) FHA requirements that are more stringent or restrictive than those provided for in applicable law are set forth in this SF Handbook and the Mortgagee must comply with these requirements Laws Applicable to Mortgage Servicing Generally Ref: HUD Handbook 4000.1, Sec.III.A.1.a

FHA’s National Servicing Center

Laws Applicable to Mortgage Servicing Generally - we have clarified the mortgagees’ responsibilities in being aware of and complying with all federal regulation relating to servicing (our previous guidance did not explicitly state this information)

Mortgagees must comply with all laws, rules, and requirements applicable to mortgage servicing, including full compliance with the applicable requirements under the purview of the Consumer Financial Protection Bureau (CFPB), including the Real Estate Settlement Procedure Act (RESPA) and the Truth in Lending Act (TILA).

FHA requirements that are more stringent or restrictive than those provided for in applicable law are set forth in this SF Handbook and the Mortgagee must comply with these requirements.

Where mortgage contract terms are more stringent or restrictive than those provided for in applicable law, the Mortgagee must comply with the mortgage contract terms.

The servicing of FHA-insured Mortgages must be performed by FHA-approved Mortgagees FHA-approved Mortgagees that use a subservicer to service FHA-insured Mortgages must ensure the subservicer is also approved by FHA to service FHA-insured Mortgages General Servicing FHA-Approved Servicing Requirements Ref: HUD Handbook 4000.1, Sec.I.A.6.d

The servicing of FHA-insured Mortgages must be performed by FHA-approved Mortgagees.

FHA-approved Mortgagees that use a subservicer to service FHA-insured Mortgages must ensure the subservicer is also approved by FHA to service FHA-insured Mortgages.

The servicing Mortgagee is responsible for the actions of their subservicers.

The costs associated with subservicing may not be imposed on the FHA Borrower or passed along to HUD in a claim for mortgage insurance benefits.

The servicing of HUD insured loans must be performed by a Mortgagee that is approved by HUD pursuant to HUD regulations.

This information is referenced in the Handbook Section Ref: HUD Handbook 4000.1, Sec.I.A.2.c (doing business with HUD) and also can be found in 24 CFR §§202.5 and 203.502.

The Transferor Servicing Mortgagee remains responsible for the servicing of an FHA-insured Mortgage until the Transfer Date The Transferor Servicing Mortgagee must verify that the change of legal rights to service has been reported accurately On the Transfer Date, the Transferee Servicing Mortgagee assumes responsibility for:

All servicing actions, including resolution of any servicing errors that were, and remain, the responsibility of the Transferor Servicing Mortgagee;

Obtaining the complete mortgage file, including origination and servicing records; and Ensuring that the original Mortgage, Mortgage Note, or Deed of Trust is preserved

General Servicing Responsibility During Transfers of Servicing Rights Ref: HUD Handbook 4000.1, Sec.III.A.1.b.i

Responsibility during Transfers of Servicing Rights

Definitions (A) The Transferor Servicing Mortgagee is the Mortgagee that transfers servicing responsibilities.

The Transferee Servicing Mortgagee is the Mortgagee to which the servicing responsibilities have been transferred.

The Transfer Date is the date on which the Borrower’s Mortgage Payment is first due to the Transferee Servicing Mortgagee.

Standard (B) The Transferor Servicing Mortgagee remains responsible for the servicing of an FHA-insured Mortgage until the Transfer Date. The Transferor Servicing Mortgagee must verify that the change of legal rights to service has been reported accurately.

On the Transfer Date, the Transferee Servicing Mortgagee assumes responsibility for:

all servicing actions, including ensuring resolution of any servicing errors that were, and remain, the responsibility of the Transferor Servicing Mortgagee;

obtaining the complete mortgage file, including origination and servicing records; and ensuring that the original Mortgage, mortgage Note, or deed of trust is preserved.

Required Documentation (C) The Transferor Servicing Mortgagee must report the Transfer Date and update the mortgage record in FHA Connection (FHAC) within 15 Days of the Transfer Date.

Definition Authorized Third Parties are parties who are not Borrowers on the Mortgage but who are authorized to communicate with Mortgagees regarding a Mortgage.

Standard The Mortgagee must provide mortgage information and arrange for individual consultation, upon request by the Borrowers The Mortgagee must comply with all laws, rules, and requirements applicable to third-party access to mortgage information

Communication with Borrowers and Authorized Third Parties Ref: HUD Handbook 4000.1, Sec.III.A.1.d

The above guidance is published in the new 4000.1 Single Family Housing Handbook, and is effective 3/14/2016

Communication with Borrowers and Authorized Third Parties

HUD defines Authorized Third Parties as parties who are not Borrowers on the Mortgage but who are authorized to communicate with Mortgagees regarding a Mortgage.

Remember Housing Counselors are considered “Authorized Third parties” and you should be communicating with them if the borrower authorizes you to do so, or any other person the borrower designates.

Mortgagee’s must provide mortgage information and arrange for individual consultation, upon request by the Borrowers.

Mortgagee’s are required to comply with all laws, rules, and requirements applicable to third-party access to mortgage information.

If communicating with an Authorized Third Party, the Mortgagee must include documentation of the authorization in the servicing binder:

a copy of a signed authorization from the Borrower;

a copy of a Power of Attorney (POA), order of guardianship, or other documentation authorizing that third party to act on behalf of the Borrower; or other documentation showing legal authorization to access the Borrower’s records.

Default Servicing Activities

CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY

FHA’s Office of Single Family Housing Training Module FHA’s National Servicing Center The purpose of this module is to convey HUD's minimum Early Delinquency Servicing Activity requirements that will assist in bringing a delinquent mortgage current in as short of a time as possible. Program requirements will cover: Key loss mitigation terms, Collection Activities including identifying delinquent loans, Communication Timeline, Mortgagee staffing guidance, and inbound and outbound collection requirements; and FHA Escalated Cases – process and policy guidance.

National Servicing Center Organizational Structure

The National Servicing Center (NSC) is located in Oklahoma City, OK

It’s primary function is to help FHA-insured Borrowers experiencing difficulties in resolving their mortgage delinquencies and remain in their homes by working with their Mortgagee, Mortgagees and housing counselors to find alternative solutions to foreclosure.

Through the NSC, FHA offers a number of various loss mitigation programs and informational resources to assist FHA-insured Borrowers facing financial hardship, and whose mortgage is either in default or at risk of default.

The NSC was established to serve FHA-insured Borrowers, Monitors FHA-approved Mortgagees, and serves as the primary contact for all FHA-insured mortgage servicing issues

Branch One is primarily involved in the analysis of the FHA portfolio. It is interesting to note that Branch 1 works in loan level data tracking information down to the person, and works to recognize trends with in the portfolio on a very specific level. All data requests about the portfolio as it relates to default servicing can be directed to sfdatarequests@hud.gov

Branch Two is a very active area in the NSC, all consumer calls that are escalated beyond the Mortgagee work their way through the contractor. Branch Two works these calls to help resolve issues with clients.

Branch Three works behind the scenes with HECM, Secretary Held and 235 Servicing. They work with niche products and have a very complex range of knowledge.

Director

Deputy Director

Program Director Branch 2

Contract Oversight Business Service Provider

Procurement, Audit and Compliance

System Development and Reporting

Single Family Default Monitoring System and CAIVRS

Contract Oversight Call Center

Branch 3

HUD Servicing Resolution Loss Mitigation Resolution

Predatory lending issues

Foreclosure Holds

Contract Oversight Secretary-Held Servicing

Home Equity Conversion Mortgage (HECM) Servicing)

235 Recapture Process

Post Asset Sale Complaints

Good Neighbor Next Door

Branch 1

DELINQUENT: A loan is considered delinquent any time a payment is due and not paid DATE OF DEFAULT (DOD): A Mortgage is in Default when the Borrower fails to make any payment or to perform any other obligation under the Mortgage for a period of 30 Days

Example: Last paid installment (LPI) – Feb. 1 First payment missed – March 1 Date of default = April 1

Key Terms General Loss Mitigation HUD Handbook 4000.1, Sec.III.A.2.a.i

These are some key terms that you will need to know as they relate to applying Loss Mitigation.

i. Definitions A mortgage account is Delinquent any time a payment is due and not paid.

A Mortgage is in Default when the Borrower fails to make any payment or to perform any other obligation under the Mortgage for a period of 30 Days.

ii. Standard The Mortgagee must ensure all FHA-insured Mortgages in Delinquency or Default are serviced in accordance with FHA requirements and all applicable laws.

For the purpose of determining the date of default and timelines related to default, HUD considers all months to have 30 Days.

As you can see from the example, if the account was last paid on Feb. 1, and the first missed payment is March 1 payment, the date of default is April 1.

Default (24 CFR 203.466). When a mortgagor fails to perform under any covenant of the mortgage and the failure continues for 30 days.

E.Date Of Default (24 CFR 203.331). The date of default shall be considered as 30 days after:

1.the first uncorrected failure to perform any obligation under the mortgage; or

FIRST LEGAL DEADLINE (FLD): 6 months from the Date of Default

Key Terms General Loss Mitigation (Cont’d) HUD Handbook 4000.1 Sec. III A.2.r

FIRST LEGAL DEADLINE (FLD):

If the Mortgage is in Default, The Mortgagee must utilize a Loss Mitigation Option or initiate foreclosure within six months of the date of Default.

Vacant or Abandoned Properties If the Mortgage is in Default, the Mortgagee must commence foreclosure: no later than six months after the date of Default; or no later than 120 Days after the latter of the date that: the Property becomes vacant; or the Property is discovered or should have been discovered vacant or abandoned; or for Properties that have 2, 3, or 4 units, all units are discovered or should have been discovered vacant or abandoned.

Last paid installment – May 1, 2015

The Mortgagee is responsible for:

Complying with applicable law and federal regulations relating to reporting to consumer reporting agencies; and Ensuring that all reported information is accurate Mortgagee is also responsible for any required IRS reporting regarding acquisition of secured Property or cancellation of mortgage debt Default Servicing Reporting to Consumer Agencies and the IRS Ref: HUD Handbook 4000.1, Sec.III.A.2.c

The Mortgagee is responsible for complying with applicable law and federal regulations relating to reporting to consumer reporting agencies; and ensuring that all reported information is accurate.

The Mortgagee is also responsible for any required IRS reporting regarding acquisition of secured Property or cancellation of mortgage debt, in accordance with the Internal Revenue Code (IRC).

Default Servicing Late Charges Ref: HUD Handbook 4000.1, Sec.III.A.2.d

ii. Standard The Mortgagee may consider a Borrower’s payment late if the payment is received by the Mortgagee more than 15 Days after the due date.

The Mortgagee may assess a late charge on the 17th Day of the month.

For Mortgages assigned a case number on or after March 14, 2016, the Mortgagee may assess a Late Charge, not to exceed 4 percent of the overdue payment of Principal and Interest (P&I) and in accordance with applicable law.

For Mortgages assigned a case number before March 14, 2016, the Mortgagee may assess a Late Charge calculated based on overdue PITI if permitted under the terms of the mortgage Note and under applicable law.

Notifying the Borrower of the Late Charge Before collecting the Late Charge or returning a Mortgage Payment to the Borrower for failing to pay the Late Charge, the Mortgagee must provide the Borrower with an advance written notice of the charge.

The Mortgagee must include in the advance notice the following information:

the due date of the payment;

the amount of the regular monthly payment;

the date on which the Late Charge will be imposed; and the amount of the Late Charge (or the full amount now due which consists of the regular monthly payment plus the Late Charge amount).

(B) Application of Subsequent Payment to Unpaid Late Charges After advance notice has been sent to the Borrower, the Mortgagee may: treat any subsequent payment that does not include the Late Charge in accordance with HUD’s Partial Payment section; and deduct amounts due for Late Charges owed for a previous installment.

(C) Default/Foreclosure Due to Unpaid Late Charges A Mortgage may be technically in Default by its terms if a Late Charge is not paid within 30 Days after it becomes due. However, the Mortgagee may not initiate foreclosure action when the only delinquency is due to: unpaid Late Charges that are due on the account; and/or unpaid monthly payments that remain unpaid because the Mortgagee did not comply with HUD’s Partial Payments for Mortgages in Default section.

Definition:

Late Charges are charges assessed if a Mortgage Payment is received more than 15 Days after the due date

Standard:

The Mortgagee may consider a Borrower’s payment late if the payment is received by the Mortgagee more than 15 Days after the due date

The Mortgagee may assess a Late Charge on the 17th Day of the month

For Mortgages assigned a case number on or after March 14, 2016, the Mortgagee may assess a Late Charge, not to exceed 4% of the overdue payment of Principal and Interest (P&I) and in accordance with applicable law

For Mortgages assigned a case number before March 14, 2016, the Mortgagee may assess a Late Charge calculated based on overdue PITI if permitted under the terms of the Mortgage Note and under applicable law

Default Servicing Partial Payments for Mortgages in Default Ref: HUD Handbook 4000.1, Sec.III.A.2.e

A Partial Payment is a payment of any amount less than the full amount due under the mortgage, including late charges and escrow items.

When a Partial Payment is accepted, it can be applied to the Borrower's account or placed in suspense until a full monthly payment is acquired.

Acceptance of Partial Payments Unless it is subject to the exceptions in the Return of Partial Payments for Mortgage in Default section, (which we will discuss on the next slide) the Mortgagee must accept any Partial Payment and either:

apply the payment to the Borrower’s account; or identify the payment with the Borrower’s account and hold the payment in a suspense account.

When a full monthly installment due under the Mortgage is accumulated, the Mortgagee must apply that amount to the Borrower’s account.

Required Documentation When applying the Partial Payment totaling a full monthly payment, the Mortgagee must: report the appropriate Status Code in the Single Family Default Monitoring System (SFDMS);and advance the Oldest Unpaid Installment (OUI) date one month.

Acceptance of Partial Payments:

Apply the payment to the Borrower’s account; or

Identify the payment with the Borrower’s account and hold the payment in a suspense account

When a full monthly installment due under the Mortgage is accumulated, the Mortgagee must apply that amount to the Borrower’s account

Unless subject to the exceptions in the Return of Partial Payments for Mortgage in Default section, the Mortgagee must accept any Partial Payment and either:

Partial Payments for Mortgages in Default (cont’d) Ref: HUD Handbook 4000.1, Sec.III.A.2.e.

The following is also updated guidance in the new 4000.1 SF Housing Handbook. This section outlines the reasons a Mortgagee may return a partial payment to a borrower.

Standard If the Mortgage is in Default, the Mortgagee may return the Partial Payment to the Borrower with a letter of explanation only under the following circumstances:

when the payment represents less than half of the full amount then due;

when the payment is less than the amount agreed to in an oral or written Forbearance Plan;

when the payment is less than the amount stated in an approved Trial Payment Plan (TPP) Agreement, whether or not an executed Agreement is received by the Mortgagee; (You will notice this section is highlighted in Red, this is new in the handbook) when the Property is occupied by a rent-paying tenant and the rents are not being applied to the Mortgage Payments;

when foreclosure has been started; or when it is 14 Days or more after the Mortgagee has mailed the Borrower a statement of the full amount due, including Late Charges, which advises that it intends to refuse to accept future Partial Payments (see Application of Subsequent Payment to Unpaid Late Charges), and either of the following conditions have occurred:

four or more full monthly installments are due but unpaid; or a delinquency of any amount, including Late Charges, has continued for at least six months since the account first became Delinquent.

(B) Required Documentation The Mortgagee must ensure that its servicing file reflects any Partial Payments returned to the Borrower and includes any letters of explanation for the returned payments.

Acceptable circumstances where a Partial Payment may be returned to a Borrower:

When the payment is less than the amount stated in an approved Trial Payment Plan Agreement, whether or not an executed Agreement is received by the Mortgagee

When the Property is occupied by a rent-paying tenant and the rents are not being applied to the Mortgage Payments

When foreclosure has been started; or

When it is 14 Days or more after the Mortgagee has mailed the Borrower a statement of the full amount due, including Late Charges, which advises that it intends to refuse to accept future Partial Payments and either of the following conditions have occurred:

Four or more full monthly installments are due but unpaid; or

A delinquency of any amount, including Late Charges, has continued for at least six months since the account first became Delinquent

When the payment is less than the amount agreed to in an oral or written Forbearance Plan

When the payment represents less than half of the full amount then due

The Mortgagee must preserve the first-lien status of the FHA-insured Mortgage HUD will not pay a claim on a Mortgage that lacks first priority position Default Servicing FHA Lien Status Ref: HUD Handbook 4000.1, Sec.III.A.2.f.

Lien Status (03/14/16) Effective for mortgages in default on or after March 14, 2016 The Mortgagee must preserve the first-lien status of the FHA-insured Mortgage. HUD will not pay a claim on a Mortgage that lacks first priority position.

Default Servicing Imminent Default Ref: HUD Handbook 4000.1, Sec.III.A.2.g.

Definition:

A Borrower facing Imminent Default is defined as a Borrower who is current or less than 30 Days past due on their Mortgage Payment and is experiencing a significant, documented reduction in income or some other hardship that will prevent them from making the next required Mortgage Payment during the month that it is due Standard:

The Mortgagee must obtain documentation necessary to verify that the Borrower is experiencing a significant reduction in income or some other hardship that will prevent them from making the next required Mortgage Payment during the month that it is due Required Documentation:

The Mortgagee must include in its servicing file documentation of the basis for the determination that the Borrower’s financial condition will result in a Default

Definition:

A Borrower who is current or less than 30 Days past due on their Mortgage Payment and is experiencing a significant, documented reduction in income or some other hardship that will prevent them from making the next required Mortgage Payment during the month that it is due

Standard:

Mortgagee must obtain documentation necessary to verify that the Borrower is experiencing a significant reduction in income or some other hardship that will prevent them from making the next required Mortgage Payment during the month that it is due

Mortgagee must determine the Borrower’s ability to make monthly Mortgage Payments and take loss mitigation action or commence foreclosure, within six months of the date of Default

An Extension of time must be approved by the NSC via the Extensions and Variances Automated Requests System (EVARS) https://evars.hudtulsa.org/index.cfm?fuseaction=evars.Home Notification of Default The Mortgagee must notify each Borrower, co-signer, and any other party requiring notice by state law that the Mortgage is in Default

Default Servicing Early Default Intervention Ref: HUD Handbook 4000.1, Sec.III.A.2.h

Mortgagee must determine the Borrower’s ability to make monthly Mortgage Payments and take loss mitigation action or commence foreclosure, if loss mitigation is not feasible, within six months of the date of Default, An Extension of Time or Automatic Extension of Time must be requested and approved by the NSC through the EVARS system.

Access to the EVARS system requires a password and user name. New users must complete training on the EVARS system prior to being granted to the system.

The Mortgagee must notify each Borrower, co-signer, and any other party requiring notice by state law that the Mortgage is in Default.

Default Servicing SFDMS Default Reporting Overview

This is a general overview of the Mortgagee’s Reporting requirements. We provide 3 Reporting Webinars in our Loss Mitigation Webinar series which provides detailed guidance of SFDMS reporting.

The Single Family Default Monitoring System (SFDMS) is HUD’s system for tracking Mortgagee data on delinquent mortgages until a delinquency is resolved through reinstatement or termination.

Mortgagee must report delinquent servicing activities for all mortgages that are 30, 60, and 90 Days or more delinquent as of the last day of the month.

It is important to remember that you are only reporting DELINQUENT DATA !

The Single Family Default Monitoring System (SFDMS) is HUD’s system for tracking Mortgagee data on delinquent mortgages until a delinquency is resolved through reinstatement or termination.

Mortgagee must report delinquent servicing activities for all mortgages that are 30, 60, and 90 Days or more delinquent as of the last day of the month

SFDMS Default Reporting – What to Report

When reporting delinquent data to SFDMS, the Mortgagee must report the statuses of three classes of mortgages each month:

New Delinquencies: The Mortgagee must report Delinquent accounts when one full installment is due and unpaid (30 Days Delinquent - Status Code 42) and must continue reporting the applicable Status Code until the delinquency is resolved Open Delinquencies: The Mortgagee must continue to report a Status Code 42 until a servicing action has been initiated/approved and/or completed which would warrant a Status Code change Delinquencies Resolved During the Cycle Month: The Mortgagee must report the appropriate Status Code to reflect that the delinquency has been addressed

The Mortgagee must report the statuses of three classes of mortgages each month:

New Delinquencies: The Mortgagee must report Delinquent accounts when one full installment is due and unpaid (30 Days Delinquent - Status Code 42) and must continue reporting the applicable Status Code until the delinquency is resolved

Open Delinquencies: The Mortgagee must continue to report a Status Code 42 until a servicing action has been initiated/approved and/or completed which would warrant a Status Code change

Delinquencies Resolved During the Cycle Month: The Mortgagee must report the appropriate Status Code to reflect that the delinquency has been addressed

SFDMS Default Reporting – When to Report

Timeframe for Reporting Mortgagee must submit delinquency data documenting the status as of the end of the month The Mortgagee must submit this data by the fifth business day of the following month Mortgagees may submit additional delinquency data throughout the month

MOUSE CLICK

SFDMS Codes The Mortgagee must report the correct Delinquency/Default Status (DDS) Code reflecting the status of the Mortgage The Mortgagee must include applicable status dates when reporting DDS Codes SFDMS permits the submission of delinquency data throughout the month The Mortgagee must ascertain and report the specific reason for the Delinquency/Default using the Delinquency/Default Reason (DDR) Codes

MOUSE CLICK

Error Reports and Correction The Mortgagee may receive Error Reports from two systems:

EDI, which provides the All Transaction Sets 824 (TS824) Report (see the Electronic Data Interchange Implementation Guide for additional information); or FHA Connection FHAC The Mortgagee is responsible for retrieving Error Reports from these systems and submitting necessary corrections by the fifth business day.

HUD will not provide additional time to enter corrections.

Timeframe for Reporting

Mortgagee must submit delinquency data documenting the status as of the end of the month

The Mortgagee must submit this data by the fifth business day of the following month

Mortgagees may submit additional delinquency data throughout the month

SFDMS Codes

The Mortgagee must report the correct Delinquency/Default Status (DDS) Code reflecting the status of the Mortgage

The Mortgagee must include applicable status dates when reporting DDS Codes

SFDMS permits the submission of delinquency data throughout the month

The Mortgagee must ascertain and report the specific reason for the Delinquency/Default using the Delinquency/Default Reason (DDR) Codes

Error Reports and Correction

The Mortgagee may receive Error Reports from two systems:

EDI, which provides the All Transaction Sets 824 (TS824) Report (see the Electronic Data Interchange Implementation Guide for additional information); or

FHA Connection FHAC

The Mortgagee is responsible for retrieving Error Reports from these systems and submitting necessary corrections by the fifth business day

HUD will not provide additional time to enter corrections

Communication Timeline: Day 1-32 Ref: HUD Handbook 4000.1, Sec.III.A.2.h

•Notice of Homeownership Counseling Availability;

•Servicemembers Civil Relief Act (SCRA) Disclosure (form HUD-92070);

•Delinquency Notice Cover Letter; and •“Save your Home – Tips to Avoid Foreclosure” pamphlet (form HUD-2008-5-FHA)

Day 1: Payment due date; no action required until the loan becomes delinquent.

Day 10: The Mortgagee must begin attempts at telephone contact with Borrowers at risk of Early Payment Default or Re-Default in accordance with the Specialized Collection Techniques for Early Payment Default section.

Day 17: The Mortgagee must begin attempts to make telephone contact with the Borrower with a Delinquent Mortgage in accordance with the Telephone Contact Efforts section.

Day 20: The Mortgagee must begin mail or electronic communication collection attempts.

Day 30: The Mortgagee must report the delinquency to HUD via SFDMS.

Day 32: Beginning on the 32nd day, but no later than the 45th day from the date payment was due, you must send:

Notification to borrower(s) of the availability of housing counseling; FHA has prepared a model template of the notice that is user-friendly and designed to ensure borrowers understand how housing counselors can assist them.

You must also send the Service members’ Civil Relief Act (SCRA) Disclosure (form (HUD 92070) Day 32: Beginning on the 32nd day but, no later than the 60th day from the date payment was due, send the:

Delinquency Notice Cover Letter including the information on the Mortgagee’s loss mitigation or customer assistance hotline, Mortgagee’s mailing address, and any assigned personnel; and “Save your Home: Tips to Avoid Foreclosure” pamphlet (HUD-2008-5-FHA).

Default Servicing Communication Timeline: Day 45-90

Day 45: The Mortgagee should begin analysis to identify appropriate Loss Mitigation Options, if any.

If unable to reach the Borrower(s), the Mortgagee must perform an Occupancy Inspection.

Day 61: The Mortgagee must attempt a face-to-face interview with the Borrower no later than this date, unless exempt under 24 CFR 203.604.

Day 90: The Mortgagee must have evaluated all Loss Mitigation Options to determine whether any are appropriate. The Mortgagee must reevaluate for Loss Mitigation each month thereafter.

Mortgagees should use the following resources to determine if a servicemember is on active duty, to provide the toll free number for HUD-approved Housing Counselors, and/or to provide the appropriate pamphlet to meet HUD requirements:

Resources:

“Save Your Home: Tips to Avoid Foreclosure”- Brochure

Service member’s Civil Relief Act (SCRA) Notice:

Toll-free military one-source number (1-800-342-9647) HUD-approved Housing Counseling Agencies ( 1-800-569-4287)

RESOURCES

“Save Your Home: Tips to Avoid Foreclosure” Brochure

Service member’s Civil Relief Act (SCRA) Notice:

Toll-free military one-source number (1-800-342-9647)

HUD-approved Housing Counseling Agencies ( 1-800-569-4287)

Default Servicing - Specialized Collection Techniques for Early Payment Defaults and Re-Defaults

Specialized Collection Techniques for Early Payment Defaults and Re-Defaults Definitions Early Payment Defaults refer to all Mortgages that become 60 Days Delinquent within the first six payments.

A Re-Default is a mortgage Default occurring within six months after reinstatement or the successful use of a permanent Home Retention Option.

(B) Standard For Borrowers at risk of Early Payment Default or Re-Default, the Mortgagee must: commence telephone contact by the 10th Day after the first missed payment to remind Borrowers of Mortgage Payment timeframes;

Make a minimum of two calls per week after the 10th Day of delinquency, until:

contact is established;

The Mortgagee determines that the phone contact information is inaccurate, or no longer in service; or Until the Mortgagee determines through an Occupancy Inspection that the Property is vacant or abandoned; and Make reasonable efforts to obtain an alternate phone number and/or follow up with the Borrower using other methods of communication until contact is established.

(C) Required Documentation The Mortgagee must document in their servicing file all specialized collection efforts to reach the Borrowers at risk of Early Payment Default or Re-Default.

The Mortgagee must document in their servicing file all specialized collection efforts to reach the Borrowers at risk of Early Payment Default or Re-Default.

Early Payment Defaults (EPD):

Re-Defaults:

For Borrowers at risk of EPD or Re-Default the Mortgagee must:

Contact is established

Phone contact information is determined to be inaccurate or no longer in service, or

Mortgagee determines through an Occupancy Inspection that the Property is vacant or abandoned; and

Early Payment Defaults refer to all Mortgages that become 60 Days Delinquent within the first six payments.

A Re-Default is a mortgage Default occurring within six months after reinstatement or the successful use of a permanent Home Retention Option.

Commence telephone contact by the 10th day after the first missed payment

Make reasonable efforts to obtain an alternate phone number and/or follow up with the Borrower using other methods of communication until contact is established

Make a minimum of 2 calls per week, after the 10th day of delinquency until:

Mortgagee must attempt to contact the Borrower via telephone beginning on the 17-20th Day of delinquency, calling a minimum of two times per week until:

Contact is established; or Mortgagee has determined through an Occupancy Inspection that the mortgaged Property is vacant or abandoned

After establishing live contact, the Mortgagee must:

Determine whether the Borrower is occupying the Property Determine the reason for the delinquency, and Inform the Borrower about the availability of Loss Mitigation Options

Default Servicing Telephone Contact Efforts

Standard The Mortgagee must attempt to contact the Borrower via telephone beginning on the 17-20th Day of delinquency, calling a minimum of two times per week until: contact is established; or the Mortgagee has determined through an Occupancy Inspection that the mortgaged Property is vacant or abandoned.

The Mortgagee is expected to:

vary the times and days of the week of call attempts to maximize the likelihood of making contact with the Borrower; and have policies in place to reduce the call abandon rate and minimize the call wait time.

Promptly after establishing live contact, the Mortgagee must determine whether the Borrower is occupying the Property, ascertain the reason for the delinquency, and inform the Borrower about the availability of Loss Mitigation Options.

Mortgagees are encouraged to have written policies in place for their customer service, loss mitigation, foreclosure prevention, and collections departments for handling inbound and outbound collection calls in accordance with the requirements of this section.

Mortgagees should also include in their Quality Control (QC) Plans their methodologies for assessing their compliance with these policies.

(B) Required Documentation The Mortgagee must document in their servicing file all communication efforts to reach a Borrower with a Delinquent Mortgage by telephone.

Default Servicing Collection Letters and Electronic Communications

Standard(1) Letters and Automatic Notices The Mortgagee must begin mail or electronic communication collection attempts between the 20-25th Day of delinquency.

(2) Electronic Methods of Communication The Mortgagee must communicate through one of the following methods of communication, if it elects to communicate electronically with Borrowers:

email;

secure web portals (such as online account management tools accessible by Borrowers); and other reliable communication methods through which the Mortgagee has been able to effectively communicate with Borrowers in the past.

The Mortgagee must ensure that their electronic signature technology complies with all requirements of the Electronic Signatures in Global and National Commerce (E-SIGN) Act, 15 U.S.C. 7001 et seq.

The Mortgagee must include within the electronic communication the Mortgagee’s email address, telephone number, and/or website address.

Mortgagees are encouraged to have policies in place to reduce the Mortgagee’s time to respond to Borrowers’ electronic communications.

Mortgagees are encouraged to have written policies in place for their customer service, loss mitigation, foreclosure prevention, and collections departments for handling inbound electronic communications in accordance with the requirements of this section and to include in their QC Plans their methodologies for assessing their compliance with these policies.

(3) Selecting Best Method of Communication The Mortgagee must use the method or methods of communication most likely to receive a response from each Borrower and take into account the Borrower’s expressed preference for using certain methods of communication.

The Mortgagee must effectively communicate with persons with hearing, visual, and other communications-related disabilities and persons with limited English proficiency.

(B) Required Documentation The Mortgagee must document in their servicing file all mail and electronic communication attempts to reach a Borrower with a Delinquent Mortgage.

Collection Letters & Automatic Notices

The Mortgagee must begin mail or electronic communication collection attempts must begin between the 20-25th day of delinquency

Electronic Methods of Communications

Mortgagee may use the following methods to communicate electronically with the Borrower:

Secure web portals (such as online account management tools accessible by borrowers)

Other reliable communication methods with proven results

Selecting Method of Communications

Mortgagees should use the methods most likely to achieve substantive communication with each Borrower

Email

Must comply with all requirements of E-SIGN Act, 15 U.S.C. 70001

All communications must include Mortgagee’s email address, telephone number, and/or website address

Mortgagee must effectively communicate with persons with hearing, visual, and other communications-related disabilities and persons with limited English proficiency

Servicing Staff must be competent personnel trained to perform their assigned responsibilities.

The Mortgagee must designate personnel to respond to the Borrower’s inquiries and to assist them with Loss Mitigation Options no later than the 45th Day of delinquency Mortgagee must provide the contact information of their loss mitigation or customer assistance hotline, offering direct phone access to assigned loss mitigation personnel, in the Delinquency Notice Cover Letter

Default Servicing Assigned Loss Mitigation Personnel Ref: HUD Handbook 4000.1, Sec.III.A.2.h; 24 CFR 202.5 (b)

Per 24 CFR 202.5(b), Servicing Staff must be competent personnel trained to perform their assigned responsibilities in consumer or mortgage lending, including origination, servicing, and collection activities, and must maintain adequate staff and facilities to originate and service mortgages or Title I loans, in accordance with applicable regulations.

The Mortgagee must designate personnel to respond to the Borrower’s inquiries and to assist them with Loss Mitigation Options no later than the 45th Day of delinquency.

Mortgagee must provide the contact information of their loss mitigation or customer assistance hotline, offering direct phone access to assigned loss mitigation personnel, in the Delinquency Notice Cover Letter

Servicing Staff should familiarize themselves with Housing Counselors and how they fit in the Collection and Loss Mitigation process. They should utilize HUD's website to locate the appropriate agency that is closest to the Borrower and understand how Housing Counselors are to be utilized to benefit the Borrower, Mortgagee and HUD.

The servicing of HUD insured loans must be performed by a Mortgagee that is approved by HUD pursuant to HUD regulations. See 24 CFR §§202.5 and 203.502.

The regulations do not preclude an HUD-Approved Mortgagee from performing servicing actions on behalf of another HUD-Approved Mortgagee or at the direction of an HUD-Approved Mortgagee.

Default Servicing Occupancy Inspections

An Occupancy Inspection is a visual inspection of a mortgaged Property by the Mortgagee to determine if the mortgaged Property has become vacant or abandoned and to confirm the identity of any occupants An Occupancy Follow-Up is an attempt to communicate with the Borrower via letter, telephone, or other method of communication, other than on-site inspection, to determine occupancy when the Mortgage remains in default after the initial inspection and the Mortgagee has not determined the Borrower’s occupancy status

Occupancy Inspection

Occupancy Follow-Up

A visual inspection of a mortgaged Property by the Mortgagee to determine if the mortgaged Property has become vacant or abandoned and to confirm the identity of any occupants

An attempt to communicate with the Borrower via letter, telephone, or other method of communication, other than on-site inspection, to determine occupancy when the Mortgage remains in default after the initial inspection and the Mortgagee has not determined the Borrower’s occupancy status

Standard If the Mortgagee is unable to reach the Borrower(s) by the 45th Day of delinquency, the Mortgagee must perform a visual inspection of the mortgaged Property to determine occupancy status.

Initial Occupancy Inspection Mortgagee must perform the initial Occupancy Inspection no later than the 60th Day of delinquency when:

The Mortgage is in Default;

A payment has not been received within 45 Days of the due date; and Efforts to reach the Borrower or occupant have been unsuccessful Follow-Ups and Continued Inspections If Mortgagee is unable to determine Borrower’s occupancy status through the initial Occupancy Inspection Mortgagee must perform Occupancy Follow-Ups, and If necessary, Occupancy Inspections every 25-35 Days from the last inspection until the occupancy status is determined

Occupancy Inspections during Bankruptcy When payments are not submitted as scheduled by a Borrower in bankruptcy, the Mortgagee must contact either the bankruptcy trustee or the Borrower's bankruptcy attorney for information concerning the status of the Borrower, to determine if an Occupancy Inspection is needed.

The Mortgagee must continue to perform exterior-only visual inspections until the Default is cured, the Property is disposed of, or the bankruptcy court has granted approval for the Mortgagee to contact the Borrower or to take any required Property P&P actions.

If the Mortgagee determines that the Property is vacant or abandoned during the period in which the Mortgagee is prohibited from contacting the Borrower, the Mortgagee must note: the date it made its determination in the servicing file; and that contact with the attorney or trustee has been made.

Initial Occupancy Inspection

Mortgagee must perform the initial Occupancy Inspection no later than the 60th Day of delinquency when:

The Mortgage is in Default;

A payment has not been received within 45 Days of the due date; and

Efforts to reach the Borrower or occupant have been unsuccessful

Follow-Ups and Continued Inspections

If Mortgagee is unable to determine Borrower’s occupancy status through the initial Occupancy Inspection Mortgagee must perform Occupancy Follow-Ups, and

If necessary, Occupancy Inspections every 25-35 Days from the last inspection until the occupancy status is determined

Occupancy Inspections during Bankruptcy

When payments are not submitted as scheduled by a Borrower in bankruptcy, Mortgagee must contact the bankruptcy trustee or the filing attorney for information concerning the status of the Borrower, to determine if an Occupancy Inspection is needed

Mortgagee must continue to perform exterior-only visual inspections we have put some additional steps in place to ensure that the property is in fact vacant and/or abandoned by the borrower by sending an additional notification letter to the borrower. This requirement allows the Borrower to contest the determination and will help to ensure that the Mortgagee does not incur additional costs in performing unnecessary P&P actions.

Determination that the Property is Vacant or Abandoned If the Mortgagee determines through an Occupancy Inspection that the Property is vacant or abandoned, the Mortgagee must:

Send a letter, via certified mail or other method providing delivery confirmation, to Borrowers at the property address informing them of the Mortgagee’s determination that the Property is vacant or abandoned.

This letter must include the Mortgagee’s contact information;

You must continue with your Vacant Property Inspections; and You must take appropriate Property Preservation and Protection actions to secure and maintain the Property.

Inspection Reports Mortgagees must document in its inspection report the general condition of the Property, as well as any actions taken to protect and preserve the Property Mortgagee must include on each inspection report the following items, where applicable:

date of the inspection identity of the individual inspector and the inspection company Is the Property occupied?

Is the house locked?

Is the grass mowed and/or are shrubs trimmed?

Is there any apparent damage?

Is any exterior glass broken?

Are there any apparent roof leaks?

Does the house contain Personal Property and/or debris?

Are any doors or windows boarded?

Is the house winterized?

Are there any repairs necessary to adequately preserve and protect the Property?

Determination that the Property is Vacant or Abandoned

If the Mortgagee determines through an Occupancy Inspection that the Property is vacant or abandoned, the Mortgagee must:

Send a letter, via certified mail or other method, providing delivery confirmation to Borrowers at the property address informing them of the Mortgagee’s determination that the Property is vacant or abandoned

Letter must include the Mortgagee’s contact information

Commence Vacant Property Inspections; and

Take appropriate Property Preservation and Protection actions to secure and maintain the Property

Inspection Reports

Mortgagees must document in its inspection report the general condition of the Property, as well as any actions taken to protect and preserve the Property

Vacant Property Inspections

Mortgagee must take reasonable actions to protect the value of the security, including performing the following required inspections for vacant or abandoned Properties:

An Initial Vacant Property Inspection is the first inspection performed by the Mortgagee to ascertain the condition of a vacant or abandoned Property Mortgagee must perform the Initial Vacant Property Inspection on the date it takes possession of a vacant or abandoned Property

Definition A Vacant Property Inspection is an inspection by the Mortgagee of a Property that is not occupied.

(B) Standard The Mortgagee must take reasonable actions to protect the value of the security, including performing the following required inspections for vacant or abandoned Properties.

The Mortgagee is liable for any damage resulting from the Mortgagee’s failure to preserve and protect the Property unless the Mortgagee can prove that the damage occurred prior to the date the Property became vacant.

(1) First-Time Vacant Property Inspection(a) Definition A First-Time Vacant (FTV) Property Inspection is the first inspection performed by the Mortgagee to ascertain the condition of a vacant or abandoned Property.

(b) Standard The Mortgagee must perform the FTV Property Inspection on the date it takes possession of a vacant or abandoned Property.

The Mortgagee must: secure the Property, if possible;

pressure-test all water supply and upload photographs of the results of the test into P260;

address all imminent and urgent safety hazards and determine what repairs are required to prevent damage to the property; and photograph the primary exterior facades and interior areas of the primary and secondary Structures, including any damage found.

Vacant Property Inspections

Reporting Occupancy Status and Date Mortgagee must advise HUD when the mortgaged Property becomes vacant by reporting in SFDMS:

The Occupancy Status Code; and The date when the Mortgagee determined that the mortgaged Property became vacant Vacant Property Inspection(a) Standard(i) Vacant Property Inspection Cycle The Mortgagee must perform Vacant Property Inspections every 25-35 Days after the FTV Property Inspection until the mortgage Default is cured or until conveyance of the property to HUD.

In areas of high vandalism or where local ordinances require more frequent Vacant Property Inspections, Mortgagees may perform Vacant Property Inspections more frequently than HUD’s 25-35 Day…