FHA Single Family Housing Policy Handbook TABLE OF ...

FHA Single Family Housing Policy Handbook II. Title II Insured Housing Programs Forward Mortgages Table of Contents

1

FHA Single Family Housing Policy Handbook

2

TABLE OF CONTENTS

3 II. TITLE II INSURED HOUSING PROGRAMS FORWARD 4 MORTGAGES .........................................................................................................1

5 B. SERVICING ............................................................................................................................ 1

6 1. Servicing of FHA-Insured Mortgages ...................................................................................... 1

7

a. Servicing Responsibility ..................................................................................................... 1

8

i. Definition ...................................................................................................................... 1

9

ii. Standard ........................................................................................................................ 2

10

(A) Transferee and Transferor Servicing Responsibility .............................................. 2

11

(B) Selling Mortgagee Responsibility........................................................................... 2

12

(C) Purchasing Mortgagee Responsibility .................................................................... 2

13

(D) Registration with Mortgage Electronic Registration System, Inc. ......................... 2

14

b. Communications with Borrowers ....................................................................................... 2

15

i. Mortgagee Communication Capabilities ...................................................................... 3

16

ii. Communication with Authorized Third Parties ............................................................ 3

17

(A) Definition ................................................................................................................ 3

18

(B) Standard .................................................................................................................. 3

19

(C) Required Documentation ........................................................................................ 3

20

iii. Notice to the Borrower of Transfer of Servicing .......................................................... 3

21

(A) Notice from the Transferor Servicing Mortgagee................................................... 4

22

(B) Notice from the Transferee Servicing Mortgagee .................................................. 4

23

iv. Statement of Escrow Account....................................................................................... 4

24

v. Payoff Procedure Disclosure......................................................................................... 4

25

vi. Annual Notices to Borrower ......................................................................................... 5

26

(A) Annual Prepayment Disclosure Statements ............................................................ 5

27

(B) Statement for Income Tax Purposes ....................................................................... 6

28

c. Servicing Fees and Charges ................................................................................................ 7

29

i. Reasonable and Customary Fees and Charges.............................................................. 7

30

ii. Prohibited Fees and Charges......................................................................................... 7

31

iii. Fees for Borrower Requests for Certain Services ......................................................... 7

32

(A) Copy of Mortgage or Deed of Trust ....................................................................... 7

33

(B) Copy of Mortgage Note .......................................................................................... 8

34

(C) Copy of Settlement Statement ................................................................................ 8

35

(D) Copy of Amortization Schedule.............................................................................. 8

36

(E) Replacement Coupon Books................................................................................... 8

37

(F) Verification of Mortgage ........................................................................................ 8

38

(G) Copy of Year-End Statement .................................................................................. 8

39

iv. Other Fees and Charges ................................................................................................ 8

40

d. Providing Information to HUD ........................................................................................... 8

41 2. Servicing of Performing Mortgages.......................................................................................... 9

42

a. Transfers of Servicing and Sales of Mortgages .................................................................. 9

43

i. Compliance with all Applicable Laws, Rules, and Requirements ................................ 9

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ii. Transfers of Servicing................................................................................................... 9

2

(A) Notification to HUD of Transfer............................................................................. 9

3

(B) Mortgage Payments during Transfer ...................................................................... 9

4

(C) Failure to Provide Timely Notice ........................................................................... 9

5

iii. Sale of the Mortgage ..................................................................................................... 9

6

iv. Mortgage Insurance Premium Reports ....................................................................... 10

7

v. Mortgage Record Changes in FHAC .......................................................................... 10

8

b. Escrow Setup .................................................................................................................... 10

9

i. Compliance with all Applicable Laws, Rules, and Requirements .............................. 10

10

ii. Escrow Deposits.......................................................................................................... 10

11

(A) Special Custodial Account .................................................................................... 10

12

(B) Trust Clearing Account ......................................................................................... 10

13

iii. Commingling .............................................................................................................. 11

14

c. Escrow Administration ..................................................................................................... 11

15

i. Additional Collections ................................................................................................ 11

16

ii. Proper Use of Escrow Funds....................................................................................... 11

17

(A) Improper Application of Escrow Funds................................................................ 11

18

(B) Escrow Funds May Be Treated as One Entity ...................................................... 12

19

(C) Interest on Escrow................................................................................................. 12

20

(D) Investment of Escrow Funds................................................................................. 12

21

(E) Prohibition on Pre-Accrual ................................................................................... 12

22

(1) Definition ........................................................................................................ 12

23

(2) Standard .......................................................................................................... 13

24

iii. Escrow Analysis.......................................................................................................... 13

25

iv. Payments from Escrow Accounts ............................................................................... 13

26

(A) Penalties Assessed to Borrowers .......................................................................... 13

27

(B) Payment of Insurance Premiums .......................................................................... 14

28

(1) Long-term Policies.......................................................................................... 14

29

(2) Optional Policies ............................................................................................. 14

30

(3) Advancing Corporate Funds for Optional Policies ......................................... 14

31

(4) Personal Property and Personal Liability Insurance ....................................... 14

32

(5) Life Insurance and Disability Insurance ......................................................... 15

33

(6) Insurance Protecting Only the Mortgagee ...................................................... 15

34

d. Insurance Coverage Administration ................................................................................. 15

35

i. Hazard Insurance ........................................................................................................ 15

36

(A) Payment of Renewal Premium.............................................................................. 15

37

(B) Notification of Loss .............................................................................................. 15

38

(C) Fee for Change in Hazard Insurance Policy ......................................................... 15

39

ii. Flood Insurance........................................................................................................... 16

40

iii. Hazard or Flood Insurance Proceeds .......................................................................... 16

41

(A) Insurance Claims................................................................................................... 16

42

(B) Loss Settlement Amounts for Borrower Expenses and Personal Property........... 16

43

(C) Insurance Proceeds for Home Damage................................................................. 16

44

(D) Application of Excess Insurance Proceeds to Unpaid Principal Balance ............. 16

45

iv. Optional Policies ......................................................................................................... 16

46

(A) Personal Property and Personal Liability Insurance ............................................. 16

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(B) Life or Disability or Optional Coverage Income Policies .................................... 17

2

e. Payment Administration ................................................................................................... 17

3

i. Monthly Payments ...................................................................................................... 17

4

ii. Premium Payments for Optional Coverage ................................................................ 17

5

iii. Fees for Uncollectible Checks .................................................................................... 17

6

iv. Return of Partial Payments ......................................................................................... 17

7

(A) Definition .............................................................................................................. 17

8

(B) Standard ................................................................................................................ 18

9

v. Prepayment Procedures............................................................................................... 18

10

(A) Definitions............................................................................................................. 18

11

(B) Prepayment Procedures......................................................................................... 18

12

(1) Mortgages Closed On or After January 21, 2015 ........................................... 18

13

(2) Mortgages Closed Before January 21, 2015 ................................................... 19

14

(a) Mortgages Insured On or After August 2, 1985 ....................................... 19

15

(b) Mortgages Insured Prior to August 2, 1985.............................................. 19

16

(i) Borrower's Notice of Intent to Prepay................................................ 19

17

(ii) Effective Dates for Notice of Intent to Prepay.................................... 20

18

(iii)Installment Due Date Falls on a Non-Business Day........................... 20

19

(3) Methods of Applying Partial Prepayments ..................................................... 20

20

(4) Payoff Procedure Disclosure Requirements ................................................... 20

21

(C) Advance Full Monthly Payments.......................................................................... 21

22

(D) Fee for Fax of Payoff Statement ........................................................................... 21

23

(E) Fee for Additional Payoff Statements................................................................... 21

24

(F) Trustees' Fee for Satisfactions.............................................................................. 21

25

(G) Recording Fees for Satisfactions .......................................................................... 21

26

f. Mortgage Insurance Premium Remittance........................................................................ 21

27

i. Annual or Periodic MIP .............................................................................................. 21

28

ii. Payment of Periodic MIP............................................................................................ 21

29

iii. MIP Schedule.............................................................................................................. 22

30

g. Post-Endorsement Mortgage Amendments ...................................................................... 22

31

i. Modifying a Performing Mortgage ............................................................................. 22

32

(A) Modification Requiring HUD Approval ............................................................... 22

33

(B) Principal Amount of Modified Performing Mortgage .......................................... 23

34

(C) Recordation of Lien .............................................................................................. 23

35

(D) Required Documentation ...................................................................................... 23

36

(E) Fee for Modification of Performing Mortgage ..................................................... 23

37

(F) Reporting to HUD................................................................................................. 23

38

ii. Partial Release of Security .......................................................................................... 23

39

(A) Partial Releases from Condemnation.................................................................... 24

40

(1) Mortgagee Consent to Release........................................................................ 24

41

(2) Required Documentation ................................................................................ 24

42

(B) Partial Releases Requiring HUD Approval .......................................................... 24

43

(1) Request Process .............................................................................................. 24

44

(2) HUD Review................................................................................................... 25

45

(C) Fees for Partial Release of Security ...................................................................... 25

46

iii. Change of Location of Dwelling or Improvements .................................................... 25

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(A) Requesting HUD Approval for Relocation ........................................................... 25

2

(B) Emergency Relocation Not Requiring HUD Approval ........................................ 26

3

(C) Relocation Requirements ...................................................................................... 26

4

(D) Notification to HUD of Completed Permanent Relocation .................................. 26

5

(E) Temporary Relocation .......................................................................................... 27

6

(F) Notification to HUD of Completed Temporary Relocation ................................. 27

7

iv. Refinance Transactions ............................................................................................... 27

8

h. MIP Cancellation and Termination................................................................................... 27

9

i. Definition .................................................................................................................... 27

10

ii. Cancellation of MIP for Loans Closed on or after January 1, 2001 but before June 3,

11

2013............................................................................................................................. 27

12

(A) Automatic Cancellation of MIP ............................................................................ 28

13

(B) Mortgage Term of More Than 15 Years............................................................... 28

14

(C) Mortgage Term 15 Years or Less and LTV Ratio of 90 Percent and Greater ...... 28

15

(D) Mortgage Term 15 Years or Less and LTV Ratio of 89.99 Percent and Less...... 28

16

(E) Borrower-Initiated Cancellation of MIP ............................................................... 28

17

(F) Processing MIP Cancellation ................................................................................ 28

18

iii. Termination of MIP on Mortgages Closed on or after June 3, 2013 .......................... 29

19

iv. Distributive Shares...................................................................................................... 29

20

(A) Definition .............................................................................................................. 29

21

(B) Payment of Distributive Shares ............................................................................ 29

22

i. Mortgage Insurance Termination...................................................................................... 29

23

i. Definition .................................................................................................................... 29

24

ii. Termination of Mortgage Insurance ........................................................................... 29

25

iii. Voluntary Termination of Mortgage Insurance .......................................................... 30

26

(A) Borrower's Consent to Voluntary Termination .................................................... 30

27

(B) Request for Voluntary Termination ...................................................................... 31

28

(C) Prorated MIP ......................................................................................................... 31

29

(D) Effective Date of Termination .............................................................................. 31

30

iv. Escrow Balance Returned to Borrower....................................................................... 31

31

j. Record Retention ? Servicing File .................................................................................... 31

32

i. Record Reconciliations ............................................................................................... 32

33

ii. Electronic Storage ....................................................................................................... 32

34 3. Default Servicing .................................................................................................................... 32

35

a. Definitions......................................................................................................................... 32

36

b. HUD Default Servicing Contact ....................................................................................... 32

37

c. Late Charges ..................................................................................................................... 33

38

i. Definition .................................................................................................................... 33

39

ii. Standard ...................................................................................................................... 33

40

iii. Advance Demand Notice ............................................................................................ 33

41

iv. Application of Subsequent Payment to Unpaid Late Charges .................................... 33

42

v. Default/Foreclosure Due to Unpaid Late Charges ...................................................... 33

43

vi. Surplus Escrow Application to Delinquency.............................................................. 34

44

d. Partial Payments................................................................................................................ 34

45

i. Acceptance of Partial Payments.................................................................................. 34

46

ii. Application of Payments............................................................................................. 34

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iii. Application of Partial Payments Totaling a Full Monthly Payment........................... 34

2

iv. Return of Partial Payments for Mortgage in Default .................................................. 35

3

v. Exceptions to Partial Payment Acceptance Rules on a Defaulted Mortgage ............. 35

4

e. Lien Status ........................................................................................................................ 35

5

f. Imminent Default .............................................................................................................. 35

6

i. Loss Mitigation Options that are Applicable for Imminent Default........................... 35

7

ii. Documenting Imminent Default ................................................................................. 36

8

g. Early Default Intervention ................................................................................................ 36

9

i. Delinquent Mortgage Identification, Availability and Documentation ...................... 36

10

ii. Communication with Authorized Third Parties on Delinquent Mortgages ................ 36

11

(A) Standard ................................................................................................................ 36

12

(B) Required Documentation ...................................................................................... 36

13

iii. Loss Mitigation/Collection Actions ............................................................................ 36

14

(A) Specialized Collection Techniques for Early Payment Defaults and Re-Defaults37

15

(B) Telephone Contact Efforts .................................................................................... 38

16

(C) Collection Letters and Electronic Communications ............................................. 38

17

(1) Letters and Automatic Notices........................................................................ 38

18

(2) Electronic Methods of Communication .......................................................... 38

19

(3) Selecting Best Method of Communication ..................................................... 39

20

(D) Reporting the Delinquency to HUD ..................................................................... 39

21

(E) Required Notices to Borrower by 45th Day of Delinquency................................. 39

22

(1) Notice of Homeownership Counseling Availability....................................... 39

23

(2) Servicemembers Civil Relief Act Disclosure ................................................. 39

24

(F) Required Notices to Borrower by 60th Day of Delinquency................................. 40

25

(1) Delinquency Notice Cover Letter ................................................................... 40

26

(2) "Save Your Home: Tips to Avoid Foreclosure" Brochure ............................. 40

27

(G) Occupancy Inspection ........................................................................................... 41

28

(1) Definitions....................................................................................................... 41

29

(2) Standard .......................................................................................................... 41

30

(a) Initial Occupancy Inspection .................................................................... 41

31

(b) Follow-Ups and Continued Occupancy Inspections................................. 41

32

(c) Occupancy Inspections during Bankruptcy .............................................. 41

33

(d) Determination that the Property is Vacant or Abandoned ........................ 42

34

(3) Required Documentation ................................................................................ 42

35

(H) Face-to-Face Interviews........................................................................................ 42

36

(I) Reporting the Reason for the Default to HUD...................................................... 42

37

(J) Notification to All Parties to the Mortgage........................................................... 42

38

h. Vacant Property Inspections ............................................................................................. 42

39

i. Occupancy Status and Date ........................................................................................ 43

40

ii. Initial Vacant Property Inspection .............................................................................. 43

41

(A) Definition .............................................................................................................. 43

42

(B) Standard ................................................................................................................ 43

43

(C) Required Documentation ...................................................................................... 43

44

iii. Vacant Property Inspection......................................................................................... 43

45

(A) Definition .............................................................................................................. 43

46

(B) Standard ................................................................................................................ 43

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(1) Vacant Property Inspection Cycle .................................................................. 43

2

(2) Additional Vacant Property Inspections ......................................................... 43

3

(C) Required Documentation ...................................................................................... 44

4

iv. Damage to Vacant Properties...................................................................................... 44

5

v. Inspection Documentation Requirements ................................................................... 44

6

i. HUD's Loss Mitigation Program...................................................................................... 44

7

i. Implementation of Loss Mitigation ............................................................................ 44

8

ii. No Waiver of Rights ................................................................................................... 45

9

iii. Eligibility Requirements ............................................................................................. 45

10

(A) Mortgage Status .................................................................................................... 45

11

(1) Home Retention Options................................................................................. 45

12

(2) Home Disposition Options.............................................................................. 45

13

(B) Owner Occupancy................................................................................................. 46

14

(1) Standard for Home Retention Options............................................................ 46

15

(2) Standard for Home Disposition Options......................................................... 46

16

(3) Documentation for Home Disposition Options .............................................. 46

17

(C) Exceptions for Borrowers with Multiple FHA Mortgages ................................... 46

18

(1) Standard .......................................................................................................... 46

19

(2) Required Documentation ................................................................................ 46

20

(D) Co-Insured Mortgages .......................................................................................... 46

21

(E) Vacant or Abandoned Properties .......................................................................... 46

22

(1) Standard .......................................................................................................... 46

23

(2) Required Documentation ................................................................................ 47

24

iv. Loss Mitigation Review Process................................................................................. 47

25

(A) Servicemember Status........................................................................................... 47

26

(B) Loss Mitigation Requests...................................................................................... 47

27

(1) Complete Loss Mitigation Requests ............................................................... 47

28

(a) Definition .................................................................................................. 47

29

(b) Standard .................................................................................................... 47

30

(2) Requests for Additional Documents ............................................................... 47

31

(C) Evaluation of the Borrower's Financial Condition ............................................... 48

32

(1) Borrower's Financial Information .................................................................. 48

33

(a) Standard .................................................................................................... 48

34

(b) Required Documentation .......................................................................... 48

35

(c) Verification of Financial Information ....................................................... 48

36

(2) Analysis of the Borrower's Financial Condition ............................................ 48

37

(D) Continuous Income for Loss Mitigation Evaluations ........................................... 49

38

(1) Definition ........................................................................................................ 49

39

(2) Standard .......................................................................................................... 49

40

(E) 90-Day Review Requirement................................................................................ 49

41

(1) Definition ........................................................................................................ 49

42

(2) Standard .......................................................................................................... 49

43

(3) Required Documentation ................................................................................ 50

44

(F) Monthly Review.................................................................................................... 50

45

(1) Standard .......................................................................................................... 50

46

(2) Required Documentation ................................................................................ 50

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(G) Loss Mitigation Reporting .................................................................................... 50

2

(H) Electronic Signatures ............................................................................................ 50

3

(I) Notice to Borrower after Telephone Evaluation ................................................... 50

4

(J) Notice to Borrower after Loss Mitigation Review ............................................... 50

5

(K) Loss Mitigation during Bankruptcy Proceedings ................................................. 51

6

(1) Bankruptcy Proceedings for which Borrower has an Attorney ...................... 51

7

(2) Bankruptcy Pro Se (Borrower Does Not Have an Attorney).......................... 51

8

v. HUD's Loss Mitigation Option Priority Waterfall ..................................................... 51

9

vi. Home Retention Options............................................................................................. 53

10

(A) Forbearance Plans ................................................................................................. 53

11

(1) Definitions....................................................................................................... 54

12

(2) Standard .......................................................................................................... 54

13

(3) Formal Forbearance Reporting ....................................................................... 54

14

(B) HUD Postponement of Principal Payments for Servicemembers......................... 54

15

(C) Special Forbearance ? Unemployment ................................................................. 55

16

(1) Definition ........................................................................................................ 55

17

(2) Eligibility ........................................................................................................ 55

18

(a) Defaulted Mortgage Status ....................................................................... 55

19

(b) Borrower Qualifications............................................................................ 55

20

(i) Standard .............................................................................................. 55

21

(ii) Exception to Owner-Occupant Requirement ...................................... 56

22

(iii)Required Documentation .................................................................... 56

23

(c) Property Condition.................................................................................... 56

24

(3) Review under the Loss Mitigation Home Retention Priority Waterfall ......... 56

25

(4) Special Forbearance ? Unemployment Agreement ........................................ 57

26

(a) Definition .................................................................................................. 57

27

(b) Standard .................................................................................................... 57

28

(c) Required Documentation .......................................................................... 58

29

(d) Effective Date ........................................................................................... 58

30

(e) Review of SFB-Unemployment Agreements ........................................... 58

31

(f) Re-Evaluation of the SFB-Unemployment Agreement ............................ 58

32

(g) Expiration of SFB-Unemployment Agreement ........................................ 59

33

(5) Payment Application....................................................................................... 59

34

(6) Foreclosure-Related Fees and Costs ............................................................... 59

35

(7) Option Failure ................................................................................................. 60

36

(8) Special Forbearance Compensation ................................................................ 60

37

(a) Standard .................................................................................................... 60

38

(b) Required Documentation .......................................................................... 60

39

(D) Loan Modification ................................................................................................ 60

40

(1) Definition ........................................................................................................ 60

41

(2) Standard .......................................................................................................... 60

42

(3) Eligibility ........................................................................................................ 61

43

(a) Defaulted Loan Status............................................................................... 61

44

(b) Borrower Qualifications............................................................................ 61

45

(i) Market Rate......................................................................................... 62

46

(ii) Market Rate Resources ....................................................................... 62

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(c) Property Condition.................................................................................... 62

2

(4) Review under the Loss Mitigation Home Retention Priority Waterfall ......... 62

3

(5) Trial Payment Plans ........................................................................................ 63

4

(a) Definition .................................................................................................. 63

5

(b) Standard .................................................................................................... 63

6

(c) Trial Payment Plan Terms ........................................................................ 63

7

(d) Trial Payment Plan ? Application of Payments ........................................ 63

8

(e) Trial Payment Plan Start after 12 months after Origination ..................... 63

9

(f) Funds Remaining at the End of Trial Payment Period ............................. 63

10

(g) Trial Payment Plan Failure ....................................................................... 64

11

(h) Application of Funds after Trial Payment Plan Failure ............................ 64

12

(i) Review for Other Loss Mitigation Options .............................................. 64

13

(i) Ineligibility for Home Retention Options ........................................... 64

14

(ii) Change in Financial Circumstances.................................................... 64

15

(iii)No Change in Financial Circumstances .............................................. 64

16

(iv) Documentation of Changes in Financial Circumstances .................... 64

17

(j) Trial Payment Plans during Foreclosure................................................... 65

18

(6) Loan Modification Documents ....................................................................... 65

19

(7) Loan Modification Provisions......................................................................... 65

20

(a) Interest Rate .............................................................................................. 65

21

(b) Modified Principal Balance ...................................................................... 66

22

(8) FHA Mortgage Insurance Coverage and MIP ................................................ 66

23

(9) Lien Status ...................................................................................................... 66

24

(a) Subordination Request .............................................................................. 66

25

(b) Subordination Notification........................................................................ 67

26

(10) Disclosures ................................................................................................ 67

27

(11) Default following Loan Modification ....................................................... 67

28

(12) Delivery of Loan Modification Documents to HUD ................................ 67

29

(13) Foreclosure-related Fees and Costs .......................................................... 67

30

(14) Loan Modification Incentive..................................................................... 68

31

(15) Non-Incentivized Loan Modifications ...................................................... 68

32

(16) Reporting of Loan Modification Terms .................................................... 68

33

(E) FHA-HAMP.......................................................................................................... 68

34

(1) Definition ........................................................................................................ 68

35

(2) Eligibility ........................................................................................................ 68

36

(a) Mortgage Status ........................................................................................ 68

37

(i) Defaulted Mortgage ............................................................................ 68

38

(ii) Mortgage in Imminent Default ........................................................... 69

39

(iii)FHA Streamline Refinance Mortgage ................................................ 69

40

(b) Borrower Qualifications............................................................................ 69

41

(c) Property Condition.................................................................................... 70

42

(3) Review under the Loss Mitigation Home Retention Priority Waterfall ......... 70

43

(4) FHA-HAMP.................................................................................................... 71

44

(a) Stand-Alone FHA-HAMP Loan Modification ......................................... 71

45

(b) Stand-Alone FHA-HAMP Partial Claim .................................................. 71

46

(i) Statutory Maximum for Partial Claims............................................... 71

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