HUD recently issued Mortgagee Letter 2020-21 (ML 20-21), implementing certain enhancements to the FHA Claims Without Conveyance of Title (CWCOT) procedures. Mortgagees may follow the updated guidance provided in ML 20-21 immediately, but must follow such guidance for all foreclosure sales associated with defaulted FHA-insured mortgages scheduled to occur on or after October 5, 2020.
The policy updates provided in ML 20-21 include, in part, the following:
- If a property that had an exterior-only appraisal becomes vacant, mortgagees must obtain a new appraisal that includes both an interior and exterior inspection if: (1) before foreclosure, any delay due to obtaining a new appraisal will not cause the foreclosure sale to be canceled, or (2) after foreclosure, the mortgagee conducts post-foreclosure sales efforts;
- Updates the procedures for determining a property’s Commissioner’s Adjusted Fair Market Value (CAFMV);
- Permits mortgagees to submit for reimbursement eviction costs and eligible property preservation expenses incurred during post-foreclosure sales opportunities;
- Provides mortgagees with an automatic extension of the conveyance timeframes to attempt post-foreclosure sales efforts in circumstances where mortgagees have complied with all required foreclosure timeframes; and
- Updates the policy and allowable fee structure regarding independent third-party providers that conduct foreclosure sales or post-foreclosure sales efforts.
HUD noted that the changes made by ML 20-21 will be incorporated into FHA’s Single Family Housing Policy Handbook 4000.1.