www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 January 30, 1985 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 85-2 TO: ALL APPROVED MORTGAGEES SUBJECT: Implementation of New Single Family Claims Payment System (Title II mortgages) Effective March 1, 1985, the Department will implement a new single family claims processing system. This letter provides the information you will need to submit claims for insurance benefits under the new system. As stated in Mortgagee Letter 84-27, a new five-part claim application form, HUD-270ll, Single Family Application for Insurance Benefits, will be used for all types of single family claims. Courtesy copies (with instructions) have already been sent to all mortgagees under separate cover. You can request routine supplies of the form from your local HUD office. MORTGAGEES MUST READ AND FOLLOW THE CLAIM INSTRUCTIONS VERY CAREFULLY AS YOU ARE PREPARING YOUR CLAIM. Under the new system, it is particularly important that all required data be entered correctly. If your submission is correct, you should receive payment within a very short time. If there are errors or omissions, your payment may be delayed, and you may be required to submit backup documentation. You must also pay particular attention to the time requirements. Failure to adhere to these time requirements can result in the curtailment of interest. Also, dates must always be entered numerically. All claims received at HUD on or after March 1, 1985, must be prepared on the new claim form. Claims received on the old form after that date will be returned for resubmission. To ensure proper phase-in, it is recommended that you prepare all new claims that are to be submitted during the last week of February 1985 on the new claim form. Previously submitted conveyance claims that are still pending at HUD on March 1 will be processed under the old system. Fiscal data for these pending claims must be submitted using the old Form 2767, Fiscal Data to Support Claim for Insurance Benefits. In addition, effective March 1, 1985, all supplemental claims, irrespective of when the initial claim was submitted, must be prepared and submitted on the new claim form. If mortgagees have significant comments or explanations to make, they may be stated on the reverse of Part B. Do not calculate interest on supplemental claims when the original claim was submitted prior to March 1, 1985. _____________________________________________________________________ 2 Under the new system, HUD will no longer acknowledge receipt of submitted claims. Such acknowledgement will not be necessary, since a major goal of the new system is to pay all claims within a few days of receipt at HUD. Of course, it should be recognized that there will always be legitimate occasions when the process will take longer. Your patience will be particularly appreciated during the first months of system operations. Mortgagees must submit to HUD Headquarters, Washington, DC, with Part A of the new claim form, the original mortgage insurance certificate (MIC); and, later with Part B, the original title approval letter which will have been received from the local HUD office. (See Mortgagee Letters 84-7 and 84-7 Supplemental on this subject.) Certain other information must be provided to local HUD offices, as provided in the claim instructions. HUD will no longer accept a copy of the MIC. This includes all single family (Title II) claims. If the original MIC has been lost or destroyed, mortgagees must attach a written certification that the case is insured and that all premium payments are current. The attached certification statement form must be completed and submitted with the claim form when the MIC is lost or destroyed. Supporting documents and receipts for reimbursable expenses are not to be submitted with the new claim application form. However, for HUD monitoring purposes, you must retain a complete audit file for each claim. The audit file must be retained for a period of three years after final or supplemental settlement. The audit file should contain all records that support the claim, such as receipts, invoices, ledger histories, etc. You must be able to readily produce all receipts and supporting information upon request. The file must be easily accessible to local HUD offices performing on-site mortgagee reviews. The Office of Finance and Accounting will also be reviewing randomly selected case files for post-audit purposes. Lack of supporting documentation may result in disallowances of claimed amounts. Also effective March 1, 1985, is HUD's new rule on calculating debenture interest on reimbursable expenses from the date of expenditure. Mortgagees are required to calculate their own debenture interest on the new claim form. The rule has been published in the Federal Register and applies to conveyed properties only. Procedures for doing this are outlined in the claims instruction package. On conveyance claims, HUD will reimburse lenders l00 percent on the initial payment of claim, rather than 90 percent. To comply with Section 221(g)(4) of the National Housing Act, on automatic (optional) assignments, HUD will no longer allow mortgagees to claim fees or expenses (legal/recording, etc.) associated with assigning the mortgage to HUD. With respect to title approval, HUD will allow lenders fifteen days from the date of title approval, rather than ten, for the claim to be received at HUD. _____________________________________________________________________ The claim payment check issued to mortgagees will include the FHA case number and the mortgagee loan number. A separate "Advice of Payment" notice will be sent to mortgagees which outlines what has been paid. A copy of the Advice of Payment must be retained in the mortgagee's audit file, as well as any other correspondence relating to the claim. If you need help in preparing your submission or if you have a question regarding the status of your claim, you may call the HUD Helpline at (202) 755-3700. Please wait until a claim has been submitted at least two or three weeks before inquiring about its status. Program or policy related questions (such as those that concern the amounts that can be claimed) must be directed to your local HUD office. If you wish to write to HUD about a particular claim or about the claims process in general, address your correspondence to: Director Insurance Claims Division, OFA P. O. Box 23998 Washington, DC 20026 Always include the FHA Case Number, the Section of the Act Code, the type of settlement (Partial, Final, Supplemental) and, of course, a description of the problem. Sincerely, Shirley McVay Wiseman General Deputy Assistant Secretary for Housing-Federal Housing Commissioner Attachment _____________________________________________________________________ MORTGAGE INSURANCE CERTIFICATE CERTIFICATION STATEMENT FHA Case No. _______________________________________________________ Mortgagors _________________________________________________________ Property Address ___________________________________________________ City, State and Zip Code _________________________________________________________ Original Mtge. Amount ______________________________________________ Endorsement Date ___________________________________________________ Certification: The undersigned certifies that the above mortgage is fully insured by the Federal Housing Administration and that the original Mortgage Insurance Certificate has been lost or destroyed. The undersigned also certifies that the contract of insurance for this mortgage has not been previously terminated and that mortgage insurance premiums are current. ___________________________ _________________ (Signature) (Date) _________________________________________________ (Title) Warning: "Federal statutes provide severe penalties for any fraud, intentional misrepresentation, or criminal connivance or conspiracy purposed to influence the payment or allowance of any claim or benefit by the Federal government." _____________________________________________________________________