Under the FHA-HAMP Partial Claim Option, the Lender will advance funds on behalf of the Borrower in an amount necessary to reinstate the delinquent loan. The maximum value of all outstanding Partial Claims for a given loan cannot exceed 30 percent of the outstanding Unpaid Principal Balance (UPB) as of the date of the default associated with the Initial Existing Partial Claim if applicable. An FHA streamlined refinance or change in FHA case numbers does not reset this 30% maximum.
The Borrower will execute a Promissory Note and Subordinate Mortgage payable to HUD. Currently, these Promissory or "Partial Claim" Notes assess no interest and are not due and payable until the Borrower either pays off the first mortgage or no longer owns the property.
Question 1: In utilizing the FHA-HAMP Partial Claim Option to bring an asset current, can the Lender include all fees and corporate advances?
Answer: Mortgagee Letter 2015-18, states, that legal fees and foreclosure costs actually incurred as of the date of the foreclosure cancellation can be included in the Partial Claim amount. However, in no case will FHA reimburse attorney's fees in excess of the amounts reflected in HUD's Schedule of Attorney Fees. Likewise, any amounts claimed for an incomplete foreclosure must be for work actually performed.
Question 2: A Loan Modification was completed; the Borrower subsequently defaults again under different circumstances; it's been less than 12 months since the Loan Modification was completed; can the Lender consider a FHA-HAMP Partial Claim?
Answer: No, mortgagors may receive a Loan Modification or FHA-HAMP only once in a 24-month period.
Question 3: Can a Lender include late charges in the FHA-HAMP Partial Claim?
Answer: Mortgagee Letter 2008-21 states that late charges should not be included in a Partial Claim.
Question 4: Must a Partial Claim be deducted from the Net Proceeds of a Preforeclosure Sale?
Answer: Yes, when using the Preforeclosure Sale Program after a Partial Claim was provided on an earlier default, the Lender must include the Partial Claim amount when calculating total indebtedness for the purpose of a Preforeclosure Sale.
Question 5: Can the Lender collect administrative fees and costs associated with the preparation of the Partial Claim Subordinate Note and Mortgage?
Answer: No. Mortgagee Letter 2003-19, Page 6, Paragraph L, "Mortgagee Incentives" states, in part: the Borrower may not be charged any additional costs for receiving this Loss Mitigation Workout Option.
Question 6: A Partial Claim was executed two years ago, now the Borrower has re-defaulted on the loan, will HUD subordinate the Partial Claim so the Lender can complete a Loan Modification?
Answer: Yes, HUD will subordinate the Partial Claim so the Lender can complete the Loan Modification. The Lender should contact HUD's Contractor at (877) 622-8525 to ascertain all language requirements and terms that must be contained in the Subordination Document.
Question 7: According to Mortgage Letter 2003-19, HUD requires that the partial claim security instrument be recorded within five (5) business days of execution by the borrower and prior to the filing of the claim, and also requires that the Lender file the claim associated with the partial claim mortgage within 60 days of execution by the borrower. What are the general procedures for those Partial Claim properties in jurisdictions that require execution of the subordination agreement by a HUD official, and is there any situation where it would be permitted for a Lender to exceed the five-business-day recordation requirement?
Answer: Generally, the Partial Claims execution and recordation process involves the following three stages:
(1) Execution of documents by Borrower (Lender should specify a "deadline date" for Borrower to return),
(2) Lender receives the executed documents from the Borrower,
(3) Upon completion of steps 1 and 2, the above-referenced five-business-day recordation requirement begins to toll. The asset is eligible for claim submission and document recordation (Block 9 of Insurance Benefit Claim is the date that the Lender mails documents for recordation).
For the Partial Claims documents that require the execution by a HUD official, however, upon receipt by the Lender of the borrower-executed Partial Claim documents, the Lender should forward the relevant documents to the National Servicing Center, Oklahoma City, OK for HUD signature. The five-business-day recordation requirement will not begin to toll until Lender’s receipt of the documents executed by HUD Official. This exception is granted only with respect to loans secured by assets in jurisdictions that require the HUD execution of the subordination agreement.
Question 8: What is the collection process on a Partial Claim that is not collected from the Borrower at the time the Borrower pays off their FHA first mortgage?
Answer: For a Partial Claim that is left unpaid at the time the Borrower pays off their FHA first mortgage, the Department bills the Borrower directly. The Partial Claim debt is not forgiven and the Borrower is required to make a lump sum payoff.
Question 9: At what point does the Lender's responsibility for a Partial Claim end?
Answer: The Lender's responsibility for a Partial Claim ends when the following two events occur: (a.) HUD receives the executed Subordinate Mortgage and (b.) When any requests for payoff of the first lien occur, the Lender is obligated to notify HUD to obtain full payoff amount of the Partial Claim and supply that information to the Borrower.
Question 10: Will a Borrower qualify for a FHA-HAMP Partial Claim when the FHA asset is less than 12 months old?
Answer: No, per Mortgagee Letter 2009-23, the first payment due date must be at least 12 months in the past, and at least 4 full mortgage payments must have been paid.
Question 11: Can a Partial Claim be used if the Borrower is more than 12 months delinquent?
Answer: Yes Mortgagee Letter 2013-32, eliminated the 12-month restriction on the amount of principal, interest, taxes and insurance (PITI) that may be included in an FHA-HAMP Partial Claim.