TABLE OF CONTENTS
Tribal Legal And Administrative Framework
Eligible Activities And Properties
Loan Processing And The Firm Commitment
Loan Closing And Endorsement
Administering Construction Loans
Alaska Processing Guidelines For Construction
Chapter 8: Loan Servicing
|8.2 General Servicing Responsibilities
|8.3 Escrow Accounts And Fees
|8.5 Prepayment And Sales
|8.6 Delinquent Servicing
|8.7 Preservation And Protection Of Property
|8.8 Lender Initiated Foreclosure
|8.9 No Foreclosure Option
|8.10 Assignment Of The Mortage To Hud (No Foreclosure Option)
|8.11 Foreclosure By The Secretary
|8.12 Property Disposition
This chapter explains the processes by which a lender must service
Section 184 loans. In order to service these loans, a lender must
meet the qualifications of Chapter 3, Lender Participation.
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GENERAL SERVICING RESPONSIBILITIES
- Objectives. All servicing policies are directed toward
achieving the following basic objectives:
- Implementing the national housing goal of "a decent
home and a suitable living environment for every American family";
- Protecting HUD’s interest in the guaranteed loan by
minimizing the probability of the mortgage terminating in default
and foreclosure and by minimizing HUD’s loss where claims
cannot be avoided;
- Encouraging private investment in HUD guaranteed home mortgages
at the lowest effective cost to mortgagors; and
- Assuring an adequate standard of fair dealing among all
participants in a HUD guaranteed mortgage transaction.
- Mortgagee responsibilities. Mortgagees must consider
the comparative effects of their various actions, and must take
those actions, which can reasonably be expected to generate the
smallest financial loss to the Department. Many complex servicing
problems arise from irregular employment, low income, and a general
lack of financial management experience. Mortgagees are expected
to adopt a flexible servicing program that recognizes differences
in mortgagors’ individual characteristics and circumstances
in order to minimize any adverse effects of these problems.
- File Retention. Servicing Mortgagee. All servicing
files (including the loan origination documents) must be retained
for a minimum of the life of the mortgage plus three years.
Upon verbal or written request, the mortgagee shall make available
to HUD staff legible hard copies of all servicing information
as well as the entire loan origination file within 24 hours.
Documents that must be kept in their original form include:
- The mortgage note.
- The mortgage instrument and riders.
- The loan guarantee certificate.
All other documents can be stored in whatever manner the servicing
lender determines. However, all documents must be able to be
reproduced into a legible hard copy.
- Transferring Loan Files. Upon the transfer of servicing
and/or the sale of a mortgage, all servicing records are to be
transferred to the new servicer or mortgagee. It is the responsibility
of the acquiring mortgagee to obtain the complete loan file including
all loan origination and servicing records.
Whenever servicing is transferred, the transferring servicer
shall notify or arrange to notify the mortgagor in a mailing
that reaches the mortgagor no later than 10 days before the
due date of the first payment to the new servicer. This notice
shall include the name, address, and telephone number of the
new servicer and include any special instructions for handling
payments during the conversion period.
The mortgagee transferring the servicing of a 184 loan is to
notify the Program ONAP of the change in servicer no later than
30 days after the due date of the first payment to the new servicer.
A sample format for this notification and the information needed
is in Appendix 4, Change in Servicing Lender.
- Location and Staffing. Servicers are not restricted
to geographic areas when servicing Section 184 loans. They must,
however, establish adequate facilities to assure that mortgage
loan information is promptly made available to mortgagors and
HUD staff when needed. The office must be sufficiently staffed
with trained personnel competent in all aspects of mortgage servicing.
Mortgagors must have access to a toll-free telephone number and/or
a collect-calling service.
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ESCROW ACCOUNTS AND FEES
- Escrow accounts. Mortgagees must establish escrow accounts
and require that mortgagors make monthly payments to ensure that
funds will be available to pay taxes (if applicable), special
assessments (if applicable) and insurance premiums when they
come due. Escrow funds shall be used only for the purpose for
which they were collected.
The establishment and maintenance of the escrow account must
meet the requirements of the Real Estate Settlement Procedures
Act (RESPA). This includes the analysis of the account and annual
notification to the mortgagor of the status of the account.
- Payment of Bills and Taxes from Escrow Accounts. It
is the mortgagee’s responsibility to make disbursements
as bills become payable even if it requires the advancing of
corporate funds where escrow deposits are inadequate to meet
these obligations. Penalties for late bill payments shall not
be charged to the mortgagor unless it can be shown that the late
payment was the result of the mortgagor’s error or omission.
Property taxes are generally not due and payable on trust land.
It is the mortgagee’s responsibility to ensure that taxes
are not escrowed for on those loans where not applicable.
- Fees After Endorsement. After the Section 184 loan
is endorsed, lenders may find that they have certain operating
or administrative expenses. Some of these expenses are permitted
to be charged to the borrower. All fees charged after endorsement
- Reasonable and customary for the area of the country.
- Based on the actual cost of the work performed (including
actual out-of-pocket expenses).
- Within the maximum amount allowed by HUD.
- Allowable Fees.
- Late Charges. Late fees may be charged as allowed
by the security instrument.
- Processing and Reprocessing of Checks. Lenders may
charge fees for checks, which have been returned as uncollectible
- Processing Assumptions. Processing fees for assumptions
must be based on the lender’s actual cost. For an assumption
with release of liability where a credit check is required,
the maximum fee is $500.
In addition the lender may charge:
- For the required credit report or verification of employment.
The allowable fee is limited to the actual cost for the
- To execute additional release of liability forms. If
a co-borrower or former borrower requests an additional
copy of the Approval of Purchaser and Release of Seller
Form (HUD Form 92210.1), a maximum of $45 may be charged.
Lenders may not charge for the copy of HUD Form 92210.1
that is completed when credit-worthiness is reviewed. That
amount is included in the $500 noted above.
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- Eligibility. The security instrument utilized by the
lender must note that the 184 loan may be assumed by a qualified
borrower. Borrowers who wish to assume a guaranteed loan must
qualify under the existing Section 184 Loan Guarantee guidelines
outlined in Chapter 5 of this guide. At the time of application
for such a transaction, the borrower and lender must submit all
of the information listed in Chapter 5 to HUD for review. Borrowers
may not assume Section 184 loans without prior HUD approval.
- Release of Liability. All Section 184 loan assumptions
include a release of financial liability for the seller. In order
to execute this release, HUD’s standard liability release
form (HUD 92210.1) may be completed and signed at closing. Lenders
may use other formats to execute the release of liability. HUD
will not issue a new guarantee certificate; however, the borrower
of record will be changed to reflect the new borrower when the
closing documents and release of liability are received.
In addition, the leasehold document must be revised. The
lender will provide a copy of the release of liability/transfer
of deed and assignment of lease to BIA. The Bureau will record
these changes in accordance with current Bureau policies and
practices. BIA must provide a copy of an executed approved
assignment of the lease to the lender. The lender will submit
a copy of the final assumption closing documents to HUD as
notification of assumption completion.
- Tribal Involvement. On tribal trust land, the lease
document may require that the tribe approve the assignment of
the lease by the new owner. Lenders should not proceed to closing
on the assumption until and unless the tribe has assigned the
leasehold to the new borrower, and it has been approved by BIA.
- Down payment. A down payment is not required on assumption
if the owner is willing to sell the property for the outstanding
indebtedness. If the seller is charging a higher price, the buyer
must make up the difference between the purchase price and the
outstanding Section 184 debt. Any secondary financing used to
make up this gap must be in a second lien position and will be
included in the assessment of the borrower’s ability to
afford this home.
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PREPAYMENT AND SALES
- Prepayment. Prepayment is permitted. No penalty will
be charged. The security instrument and any applicable riders
utilized by the lender must reflect these provisions.
- Sales. Under the Section 184 Program, homeowners have
the right to sell their property voluntarily at whatever price
is offered by a buyer. All increases in value and/or return on
equity are the sole possession of the homeowner and no resale
restrictions apply to the price of the home. In addition, there
are no restrictions regarding the credit and income of the secondary
buyer unless that buyer wishes to purchase the property with
a Section 184 loan or wishes to assume the existing Section 184
However, as noted in Chapter 1 of this guide, the sale of properties
located on tribal trust land must be approved by the tribe via
the leasehold process. In addition, BIA must approve the transfer
of the leasehold for tribal trust and then approve the mortgage
on individual allotted trust lands.
- Notice to HUD. In the event of a sale and/or loan payoff,
the lender must notify the Program ONAP in writing.
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- Collection Activities. The purpose of all collection
efforts is to bring a delinquent mortgage current in as short
a time as possible, to avoid foreclosures to the extent possible,
and to minimize losses. A successful servicing strategy treats
each delinquent mortgagor individually; and based on the circumstances
involved, custom tailors a foreclosure prevention workout plan
that will be successful in curing the delinquency and preventing
An early determination of the reason for the delinquency gives
the servicer and the mortgagor time to arrange an acceptable
method for curing it. Prompt action is required at all stages
after a delinquency has occurred. Mortgagee staff should also
review each loan in default to determine which available loss
mitigation strategy is appropriate.
- Payment Due Date. Payments on Sections 184 mortgages
are always due on the first day of the month.
- Delinquent Account. When a payment is not made on
or before its due date, the account is considered delinquent.
It remains delinquent as long as one payment remains due but
- Default. Default occurs when a borrower is 30 days
past due on his/her mortgage payments or construction loan
- Date of Default. The exact date of default is calculated
by determining the due date of the oldest unpaid installment
after all partial payments have been applied. The date of default
is 30 days after the due date of the oldest unpaid installment.
- Partial Payments. A "partial payment’ is
a payment of any amount less than the full amount due under the
mortgage at the time the payment is tendered, including late
charges and amounts advanced by the lender on behalf of the borrower
(such as for the payment of taxes).
- Default. If the borrower pays a portion of an unpaid
installment, the date of assignment and/or foreclosure action
is advanced. For example, if installments are unpaid for January,
February, and March and the borrower makes a partial payment
on the January installment, three complete and unpaid installments
will not occur until the April payment is due and unpaid.
- Acceptance of Partial Payments. The lender shall
accept any partial payment and either apply it to the borrower’s
account or identity it with the borrower’s account and
hold it in a trust account pending disposition.
When partial payments held for disposition aggregate to a full
monthly installment (after deduction of amounts due the lender
for such things as late charges and refunds of borrower advances),
they shall be applied to the borrower’s account, thus advancing
the date of the oldest unpaid installment but not the date on
which the account first became delinquent.
NOTE: While the date of default is advanced by the application
of partial payments aggregating full monthly installments, the
date on which the delinquency began remains constant unless the
account is subsequently brought completely current.
- When Return of Partial Payments is Permitted.
- If the mortgage is not in default , any partial
payment may be returned to the mortgagor with a letter of
- Mortgages in Default . If the mortgage is in default
except as provided in Paragraph 8.6c(4), a partial payment
may be returned to the mortgagor 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 property is occupied by a rent-paying tenant
and the rents are not being applied to the mortgage payments;
- When foreclosure has been started;
- When the following conditions have occurred and it
is 14 days or more after the lender has mailed the borrower
a statement of the full amount due, including late charges,
which advises that it intends to refuse to accept future
- Four or more full monthly installments are due
but unpaid; or
- A delinquency of any amount has continued
for at least six months since the account first become
- When Partial Payments Rules on a Defaulted Mortgage Need
Not Be Enforced. The rules cited are not intended to
provide borrowers with an opportunity to evade their obligations,
but, rather, to assist owner-occupants who are actually having
temporary problems in making their payments. A possible exception
in which the rules cited above in Paragraphs 8.6c(l), (2)
and (3) on accepting partial payments on a defaulted mortgage
need not be enforced is when the borrower has demonstrated
a general disregard for the obligations created by the mortgage
contract (i.e., a situation where the account has been delinquent
for up to 6 months on at least two consecutive occasions,
been reinstated, then reverts back to a delinquent status
which continues for 6 additional months).
- Counseling. Indian families who are Section 184 homebuyers
are eligible for counseling by HUD-approved counseling agencies.
If the property is in a location where there is no HUD-approved
counseling agency within a reasonable distance to the mortgagor,
the lender may contact the Tribe or HA and determine if the HA
has a staff member trained in housing counseling. If this is
available, the mortgagor may be referred to the HA staff to satisfy
this requirement. Lenders may not begin the foreclosure
process or request that HUD accept assignment of a defaulted
Section 184 mortgage unless and until the lender can document
that it has met the requirements of this paragraph.
- Notices to the Homebuyer. Lenders are expected to follow
standard, conventional market practices for reminder notices
to borrowers regarding late mortgage payments. At a minimum,
lenders must provide:
- The Borrower Information Packet is sent to the borrower
between the 35th and the 45th day of delinquency. The packet
indicates the mortgage status and describes the actions necessary
for the borrower to cure the default. This packet provides
the borrower with: (1) an 800 number the borrower may contact
to get a list of counseling agencies; or (2) a list of such
agencies. The Borrower Information Packet contains:
If telephone calls by the lender fail to be effective, the
lender will send a written notice requesting/arranging a face-to-face
interview with the borrower to discuss the mortgage status.
See section 8.6f below.
Face-to-Face Interview. Before the borrower
has missed 3 monthly installments and prior to beginning any
foreclosure or assignment activity, the lender must have a face-
to-face interview with the borrower, or make a reasonable effort
to arrange such a meeting. The purpose of this meeting is to
ascertain the causes of the late payments, provide the household
with information about its mortgage status, and determine what — if
any — actions will be possible in order to restore the status
of the mortgage. It is preferable that the face-to-face meeting
occurs early in the delinquency, giving the borrower sufficient
time to contact the counseling resources offered to him/her.
Under no circumstances may the lender request assignment or initiate
foreclosure unless the borrower has had at least fifteen (15)
business days from the date of the face-to-face interview to
contact the listed counseling resources.
- The Borrower Information Packet Cover Letter (see Appendix
4) or you may design your own initial letter containing the
same basic information including a toll free number for homeowners
to contact the lender.
- How to Avoid Foreclosure pamphlet HUD PA-426 (May
- The toll free number for Housing Counseling Agencies (1-800-569-4287),
TDD number (1-800-877-8339)
- A reasonable effort to arrange the face-to-face meeting
must include at least one trip to see the borrower at the mortgaged
property if the property is not more than 200 miles from the
lender, its servicer, or a branch office of either.
- The lender must document that it has made at least one telephone
call and sent one letter to the borrower for the purpose of
trying to arrange or confirm a face-to-face interview. Such
letters must be sent certified mail (or other comparable method).
- The lender may appoint an agent to perform the services
of arranging and conducting the meeting. The agent may be either
a private contractor or a qualified staff person from the IHA
- Face-to-face interviews are not required when:
- The mortgagor does not live in the mortgaged property;
- There is no office (or branch office) of the mortgagee
or servicer within 200 miles of the mortgaged property and
no agent or staff member from the IHA/TDHE is available for
- The mortgagor will not cooperate; or
- If an agreement has been reached on a repayment plan by
mail (or telephone) and payments under the plan are current
or are less than 30 days delinquent.
- The mortgagor is an Indian Housing Authority or an Indian
- During the face-to-face interview, the lender/holder of
the certificate must:
- Advise the borrower that information regarding the loan
will be given to credit bureaus.
- Advise the borrower of the availability of homeownership
counseling as required by section 106(c)(5) of the Housing
and Urban Development Act of 1969 (12 USC 1 70/x(c)(5)).
Provide a list of counseling agencies located within the
area. If the area is rural, and no counseling agencies exist,
the lender may refer the household to the nearest metropolitan
area with such assistance or to a trained counselor at the
IHA/TDHE, if available.
- Advise the borrower of other available assistance including
any assistance available from the borrower’s tribe or
- Notify the borrower that if the mortgage remains in default
for more than 90 days, the lender will ask HUD to accept
assignment of the mortgage or will initiate foreclosure proceedings.
- Notify the borrower of the qualifications for forbearance
relief from the lender. HUD strongly encourages the lender
to enter into a forbearance arrangement in order to cure
the default (see Repayment Plans below).
- Notify the borrower of their ability to sell their home
to avoid foreclosure. HUD 184 does not have a structured
pre-foreclosure sale program; however, the option to do a
short sale is available on a case-by-case basis with Program
- Loan Modification. The lender may evaluate the
borrower’s ability to enter into a loan modification
plan to cure the default. The Program ONAP must approve any
- Repayment Plans. The lender must evaluate whether
the borrower has the capability to reinstate the mortgage
and must discuss the possibility of a repayment plan with
the borrower. If the lender’s analysis indicates that
the delinquency is a short-term problem, the lender is strongly
encouraged to arrange a repayment plan with the borrower.
While the lender is not required to accept or develop such
a plan, HUD’s review of a mortgage assignment will consider
whether the lender has made a good faith effort to assist
the borrower to cure the default.
If the borrower defaults under a repayment plan arranged
other than by a personal interview, the lender must have
a face-to-face interview or attempt to arrange such a plan.
This meeting must occur within 30 days after the default
and at least 30 days before assignment is requested or
The actions listed above represent the minimum level
of information that must be provided to the borrower. Lenders
are strongly encouraged to provide delinquent borrowers
with on-going and complete information through a variety
of mechanisms (letters, phone calls, in-office meetings,
etc.). If a given lender uses a standard default notification
system/ methodology that significantly differs from the
one presented herein, that lender may contact the Program
ONAP for review and approval of the system prior to sending
any information to a delinquent household.
- Notice to HUD. The lender must provide written
notice to the Department when a borrower has missed 3 complete
monthly installments. A sample format of the information
to be reported is in Appendix
4, 90 or More Days Delinquent
Notice. This notice should be sent to the attention of the
Director, Office of Loan Guarantee, Program ONAP.
- End of Quarter Reporting. A Section 184 servicing
lender is required to submit to HUD’s Program ONAP (or
their designated representative), the following information
on each 184 loan within two (2) working days after the end
of each quarter (January, March, June and September):
- Borrower’s Name
- 184 Case Number
- Unpaid principal balance as of the end of the quarter
- Next payment due date (for example, if current as of
December 31, the next payment due date would be January
- Notice of Intent to Foreclose (NOI)/Acceleration Notice. If
the borrower is unable to enter into a forbearance agreement
with the lender, is unable to cure the default and does not
wish to pursue the sale of the property or other loss mitigation,
the lender will issue an NOl (the borrower must have missed
at least 3 complete installments). This notice must
be sent whether the mortgage will be assigned to HUD for
foreclosure or the lender will foreclose. The NOI must be
delivered by certified mail and regular mail. If the NOI
expires without the default being cured, the lender may proceed.
If the property is located on trust land, the lender must
review the lease document to ensure (if required under the
lease) the Right of First Refusal Letter has been sent to
the Lessor and the time frame for exercising this option
has expired. The lender may then proceed with foreclosure
and/or assignment, as applicable.
- Claim Options. If the borrower is unable to cure
the default the lender/holder of the certificate may initiate
foreclosure proceedings in a court of competent jurisdiction
or per the terms of the Deed of Trust or, the holder of the
certificate may assign the mortgage to the Department for
a full 100 percent payment of the pro rata portion of the
amount guaranteed plus reasonable fees and expenses as approved
by the Secretary.
It is the lender/holder of the certificate’s decision
whether to initiate foreclosure or request assignment of
the mortgage to HUD; however, the Department may request
the lender to proceed with foreclosure when the property
is located on fee simple land. Both options are outlined
in Paragraphs 8.8, 8.9 and 8.10.
- Credit Bureau Reporting. Ensure that the account has been
accurately reported to the National Credit Information repositories
in accordance with FNAM’s guidelines. Claims are to
be reported to the Credit Alert Interactive Voice Response
System (CAIVRS). If the lender is pursuing a foreclosure,
upon completion, they will also be required to report the
claim to CAIVRS.
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PRESERVATION AND PROTECTION OF PROPERTY
The lender is responsible for taking reasonable actions to protect
the value of the security until title can be conveyed to HUD or
the mortgage assigned to HUD.
- Lenders are expected to exercise the same level of diligence
and prudence to protect and preserve 184 loan guaranteed properties
that would be provided if they could look only to the security
for recovery. Reasonable action must be taken to protect and
preserve properties again potential damage or to stop progressive
deterioration until conveyance or assignment to the Department,
if such action does not constitute illegal trespass. If a property
is damaged because of the lender’s failure to take reasonable
action to preserve and protect or initiate foreclosure, the lender
can be held accountable.
- Responsibility for Damage. A vacant property must be preserved
and protected while it is in the possession of the lender so
that it will not be damaged at the time of conveyance or assignment.
A prudent mortgagee will preserve and protect a vacant property
to avoid potential damage to the property and avoid potential
surcharges to the claim. The Department will reimburse the lender
for required preservation and protection cost, customary for
the region, when these expenditures are adequately documented
and properly completed.
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LENDER INITIATED FORECLOSURE
- Commencement of Foreclosure Proceedings. Foreclosure
(or assignment) proceedings may not begin until at least 3 complete
monthly installments due on the mortgage are unpaid and the NOl
and/or Right of First Refusal Notice have expired. For example,
if a borrower misses his/her payment in January, February and
March, the lender will not begin foreclosure or assignment proceedings
until the day after the March payment was due (March 2nd) and
the subsequent NOI and/or Right of First Refusal have expired.
In addition, foreclosure may not begin until the lender has made
a reasonable effort to work with the borrower to clear the default
and has provided the borrower the required counseling. See paragraph
8.6 for more information.
The holder of the certificate must initiate the foreclosure
action in the court of competent jurisdiction or nonjudicially,
- Court of Competent Jurisdiction. On tribal trust
or allotted lands where a tribal court system exists, that
court system will typically have jurisdiction. On fee simple
land, the court of jurisdiction will typically be the state.
On tribal trust/allotted land without a tribal court system,
as well as fee simple land, lenders should refer to the land
status form filed at the time of the initial application. In
addition, the lender/holder of the certificate may wish to
contact the tribe, Program ONAP or private legal counsel for
additional information and advice.
- Action Upon Final Court Order. Upon final court order
authorizing foreclosure, the lender/holder of the certificate
may either: (1) resell the property and use said proceeds to
extinguish the mortgage debt; or (2) convey title to the Department
and submit a claim for a 100 percent payment on the pro-rata
amount remaining under the guarantee.
- Resale After Foreclosure. Resale of the property is
subject to the non-alienation policy outlined in paragraph 1.3g.
The holder of the certificate is free to resell the property
at whatever sales price is negotiated, if a suitable purchaser
is found. The method of this sale is left to the discretion of
the lender and/or court system overseeing the foreclosure (i.e.
individual sale, auction, etc.). On tribal trust land, lenders
should consult with tribes prior to executing a foreclosure sales
contract in order to ensure that the necessary leasehold documents
will be approved.
- The resale proceeds must be used to pay off the outstanding
Section 184 guaranteed mortgage debt. Upon receipt of the resale
proceeds, the lender/holder of the certificate must send a
letter to the Department and the settlement statement from
the sale in order to close out the Section 184 guarantee certificate.
This information should be submitted to the Department within
ten (10) days of closing the sale. If the proceeds of sale
are insufficient to cover the existing Section 184 mortgage
debt plus the lenders reasonable fees and expenses related
to the foreclosure, the lender should submit a claim to the
Department for the remaining debt and 100 percent payment of
such costs under the guarantee. Upon payment of such costs
by the Department, the loan guarantee is extinguished.
- Any excess proceeds (amounts above and beyond that which
is needed to extinguish the Section 184, and all other mortgage/property
debt) due to the foreclosure sale shall be the sole property
of the lender/holder of the certificate and shall not be restricted
as to its use. Subject to state or tribal laws, neither the
Department nor the borrower shall have a claim upon these funds.
- Under this option, the lender is responsible for ensuring
that the defaulted household is evicted under an order from
a court of competent jurisdiction.
- Conveyance of Property After Foreclosure Action. Rather
than selling the property itself, the lender may elect to convey
title to the property to the Department after the foreclosure
action is complete and marketable title is obtained. The Department
will make a payment to the lender and HUD will be responsible
for selling the foreclosed property to the subsequent homebuyer.
- Amount of Payment. The Department will pay the lender/holder
of the certificate 100 percent of the remaining portion of
unpaid obligation under the loan agreement. In addition, the
Department will reimburse the lender/holder of the certificate
for reasonable fees and expenses incurred during the foreclosure
action as approved by the Secretary. Foreclosure action by
the servicer must be timely to ensure full payment on the guarantee.
If foreclosure is not completed within one year of default,
an extension must be approved by the Program ONAP to avoid
curtailment of interest on the claim.
- Process. The lender must convey the property to the
Secretary within 30 days after acquiring possession of marketable
title to the property and submit the following to the Program
ONAP in order to receive payment on the certificate. Any time
extension must be approved by the Program ONAP:
- Request for Payment of Claim. The Single Family Application
for Insurance Benefits (HUD 27011) must be completed and
submitted with supporting documents. Items that reference "FHA’ or
Mortgage Insurance Premium (MIP) should be substituted with
ONAP and Loan Guarantee Fee (LGF). 100% of eligible expenses
will be paid; therefore, debenture interest is not applicable
on these items. All items applicable to submission of the
claim request must be completed. The forms and items listed
below must be submitted to: The Program Office of Native
American Program, 1999 Broadway, Suite 3390, Denver, CO 80202,
Attention: 184 Office of Loan Guarantee.
- Original guarantee certificate
- Original recorded Deed to Secretary of Housing and Urban
- Original Owners Title Insurance Policy to Secretary of
Housing and Urban Development
- Original note and mortgage or deed
- Copies of Leasehold documents, if applicable
- Receipts for any expenses incurred
- Documentation of existing indebtedness on the property
including pay history
- Servicing history
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NO FORECLOSURE OPTION
- Under this option the holder of the guarantee may submit
to HUD a request to assign the obligation and security interest
to HUD in return for payment of the claim under the guarantee.
HUD may accept assignment of the loan if HUD determines that
assignment is in Department’s best interest. Upon assignment,
HUD will pay to the holder of the guarantee the pro rata portion
of the amount guaranteed, including necessary fees and expenses.
Refer to Paragraph 8.10 below. If assignment is not completed
within six months of default, an extension must be approved
by the Program ONAP to avoid curtailment of interest on the
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ASSIGNMENT OF THE MORTAGE TO HUD
(NO FORECLOSURE OPTION)
- Statutory Authority. Authority to accept 100% payment
is permitted under Section 184 if the Secretary has determined
assignment to be the best interest of the United States.
- Current Policy. The Department has determined that
it is in the government’s interest to accept assignment
and make 100% payment of the outstanding balance of the loan,
including necessary fees and expenses. The lender needs to follow
delinquent servicing procedures, (paragraph 8.6) which includes
the issuance and expiration of the Notice of Intent to Foreclose/Acceleration
and Right of First Refusal Letter (if applicable), and a face-to-face
interview with the borrower.
- Policy Option. The Department reserves the right to
reevaluate this policy at a later date, based upon the Program
ONAP’s default and underwriting history. All Section 184
guaranteed mortgages closed prior to official publication of
any change in this policy will be accepted for assignment and
100% payment if they meet the above criteria.
- Notice to Homeowner. The lender must inform the borrower
in a letter delivered by certified mail or other similar method
if the lender assigns the Mortgage to the Department and must
provide the borrower with the Program ONAP’s address and
- Assignment Claim Process
- Management. The lender must have a system in place
for management review of loans to assure that appropriate decisions
were made and steps taken to minimize the risk of default and
foreclosure, and loss to the government. The management review
must take place before the NOI is issued.
- Timing. The lender cannot proceed with assignment
until all servicing requirements in Paragraph 8.6 have been
complied with up to the expiration date of the NOl and/or Right
of First Refusal letter. Within 30 days after the expiration
of the NOI and/or Right of First Refusal Letter, the lender
must submit the following to the Program ONAP in order to receive
payment on the certificate. Time extensions must be approved
by the Program ONAP.
Noncompliance. HUD cannot deny assignment due to noncompliance
during the initial underwriting by lenders, if such errors
were made in good faith. However, HUD will impose sanctions
as necessary and permitted. See Chapter 3, paragraph 3.2 for
- Single Family Application for Insurance Benefits, HUD
Form 27011 (see paragraph 8.8c(2)
- Original guarantee certificate
- Receipts for all expenses claimed
- Previous 2 years servicing history including face-to-face
- Pay history
- Copy of NOI and evidence of indebtedness at time of claim
- Copy of Right of First Refusal Letter, if applicable under
the lease document
- Original Note endorsed to Secretary of Housing and Urban
- Original Recorded Deed of Trust or Mortgage
- Assignment to Secretary of Housing and Urban Development
(sent for recording or recorded)
- Copy of leasehold documents, if applicable
- Original Title Policy or Title Status Report
- Lender must notify hazard insurance company that the Secretary
of Housing and Urban Development is first loss payee
- Lender must notify taxing authority of the assignment
to the Secretary of Housing and Urban Development, if applicable.
- Other servicing information may be requested as necessary
to complete the foreclosure
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FORECLOSURE BY THE SECRETARY
After a property has been assigned to the department, HUD may
initiate foreclosure proceedings with respect to any mortgage received
under this section in a court of competent jurisdiction or non-judicially
if applicable. If the borrower remains in the property following
foreclosure, HUD may seek an eviction order from the court of competent
jurisdiction. From an administrative perspective, such foreclosures
will be handled as much as possible in the same manner as the foreclosure
of other HUD-owned mortgages.
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After a property is in default and it is determined that the
current homeowner will be unable to carry the mortgage and remain
in the home, there are two options for property disposition. Under
option one, the homeowner finds a secondary purchaser to buy the
property prior to completion of the foreclosure. The purchaser
qualifies to assume the existing mortgage or obtains other financing
and the defaulted household moves out. Under the second option,
the foreclosure process is completed and the defaulted borrower
is evicted. The lender or HUD may then sell the property to a subsequent
homebuyer. Requirements for each type of property disposition are
In the event that an acceptable buyer cannot be found, the tribe
may propose a renter. However, title to such properties will remain
with the Department and/or lender unless an acceptable sale can
be arranged whereby the tribe or IHA purchases the property.
- Assumption of Defaulted Property. A defaulted Section
184 property may be purchased and the mortgage assumed by any
borrower meeting all of the eligibility criteria stated in Chapters
5 and 6 of this guide. Section 184 guaranteed loans may not be
assumed by non-Native Americans. All of the information listed
in Chapters 5 and 6 of this guide must be submitted to HUD for
approval prior to the assumption.
- Sale of Foreclosed Property. After a defaulted Section
184 property receives a foreclosure order, the Department and/or
lender will also endeavor to sell the property to an eligible
- Tribal Trust Land. As noted in paragraph 1.3g, HUD
and/or the lender may not sell the property to anyone other
than a Native American, Indian housing authority, or the tribe.
The lease document will require tribal consent and BIA approval
on the subsequent sale. HUD expects that tribes will not reject
eligible borrowers except as permitted under the leasehold
instrument and tribal law.
- Allotted Trust Land. On allotted trust land, HUD and/or
the lender must comply with the alienation policies stated
in paragraph 1.3g and thus will only sell the defaulted property
to a Native American, Indian housing authority, or tribe. The
tribe may propose (although not necessarily select) the subsequent
- Fee Simple Land. HUD and/or the lender may sell defaulted
fee simple land to anyone. Where possible, the Department and/or
the lender will consult with the tribe about the selection
of the homebuyer.