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General Servicing Frequently Asked Questions
This category includes all General Servicing items stated within HUD Handbook 4330.1 REV-5, Administration of Insured Home Mortgages.

Question 1 - What are HUD's guidelines regarding sub-servicing of FHA-insured Mortgages?

Answer - The servicing of FHA-insured loans must be performed by a mortgagee or servicer that is approved by FHA pursuant to FHA regulations.  See ML  2009-42.

Question 2 -  If a mortgagor contacts the mortgagee and verbally offers a repayment plan of a payment plus, can we establish a short-term repayment plan based on this information?

Answer - No, any repayment plan should be based upon the most accurate information of the mortgagor's financial situation and the lender must analyze the borrower’s current and future ability to meet the monthly mortgage obligation. See ML 2010-04.

Question 3 - Can a mortgagor acquire an FHA-insured mortgage while in a Chapter 13 bankruptcy?

Answer - Yes, a Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that:

  • one year of the pay-out period under the bankruptcy has elapsed,
  • the borrower’s payment performance has been satisfactory and all required payments have been made on time, and
  • the borrower has received written permission from bankruptcy court to enter into the mortgage transaction.

See HUD Handbook 4155.1

Question 4 - What does direct conveyance mean?

Answer - Direct conveyance means the property is deeded directly to HUD in lieu of the mortgagee taking title in its name. See Handbook 4330.4.

Question 5 - Are mortgagees required to send the HUD 426-H, "How to Avoid Foreclosure" pamphlet on assets that have been released or discharged from a Chapter 7 and/or Chapter 13 Bankruptcy?

Answer - Yes. At a minimum, the mortgagee must provide the mortgagor with a copy of the HUD publication PA 426-H, May 19, 1997, "How to Avoid Foreclosure", no later than the end of the second month of delinquency. See ML-2000-05.

Question 6 - What is an FHA Title I mortgage?

Answer - FHA Title I mortgages include mobile homes, prefabricated manufactured housing, and home improvement loans. See Handbook 1060.2.

Question 7 - Are mortgagees permitted to report to the credit bureau assets that are located within a Presidentially Declared Disaster Area?

Answer - Mortgagees should temporarily suspend reporting delinquencies to credit bureaus if they are aware that the mortgagor's delinquency is attributable to hardships he/she incurred as the result of the disaster. See HUD Handbook 4330.1 Rev-5, Chapter 14.

Question 8 - Can a mortgagee foreclose on a mortgage located on tribal lands?

Answer - No.  A mortgagee cannot foreclose on a mortgage that is located on tribal lands.  For assets that are insured under Section 248 of the National Housing Act, HUD will accept assignment of Section 248 mortgages where the mortgagor has been in default more than 90 days.  See HUD Handbook 4330.1 REV-5, Chapter 8, and ML 1988-11.

Question 9 - What are HUD’s requirements on conducting face-to-face meetings with delinquent mortgagors?

Answer - The mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid.  Except for mortgages insured pursuant to section 248 of the National Housing Act, a face-to-face meeting is not required if:

  1. The mortgagor no longer resides in the mortgaged property;
  2. There is no office or branch office of the mortgagee or servicer within 200 miles of the mortgaged property;
  3. The mortgagor has clearly indicated that he/she will not cooperate in the interview;
  4. A repayment plan, consistent with the mortgagor’s circumstances and designed to bring the account current, is entered into and payments under this repayment plan are current; or
  5. A reasonable effort to arrange a meeting is unsuccessful.

For mortgages insured pursuant to section 248 of the National Housing Act, a face-to-face meeting is required, and a reasonable effort to arrange such a meeting shall include at least one trip to see the mortgagor at the mortgaged property, notwithstanding that such property is more than 200 miles from an office or branch office of the mortgagee or servicer.  See Handbook 4330.1 Rev-5, Chapter 7.