www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 September 30, 1993 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER MORTGAGEE LETTER 93-31 TO: ALL APPROVED MORTGAGEES ATTENTION: SERVICING MANAGERS (Single Family) SUBJECT: Military Base Closings The Department of Housing and Urban Development (HUD) is providing the following information to mortgagees and servicers of FHA-insured mortgages on one-to-four family residences to assist them in responding to mortgagors affected by the closing of military bases. The relief measures described in this Mortgagee Letter are intended to mitigate the hardships faced by mortgagors with FHA-insured mortgages who are being affected by these closings. Included are certain actions HUD/FHA expects mortgagees to take in regard to servicing the affected mortgages. I. RECOMMENDED SERVICING ACTIONS. If a base closing has directly affected a mortgagor's ability to meet the mortgage obligation, the mortgagee must give utmost consideration to one or more courses of action which could relieve the financial strain being faced by that homeowner. The Department recommends exploration of one or more of the following, depending on the circumstances of each case. (Refer to Chapter 8, "HUD-Approved Relief Provisions", HUD Handbook 4330.1, REV-4, Administration of Insured Home Mortgages, for additional details.) 1. Special Forbearance may be granted to provide the mortgagor more relief than is possible with a regular repayment plan. The terms of repayment shall be structured to meet the individual needs of the mortgagors. Mortgagees must follow existing procedures with respect to special forbearance. (Refer to HUD Handbook 4330.1 , REV-4, Paragraph 8-4, for specific requirements and special forbearance options.) 2. Streamline refinancing may be appropriate in providing relief to mortgagors, because it is designed to reduce the mortgagor's monthly principal and interest payments on a current HUD-insured mortgage. Processing and Underwriting instructions are set forth in Paragraph 1-12, HUD Handbook 4155.1 REV-4, Mortgage Credit Analysis for Mortgage Insurance on One-to-Four Family Properties, dated June 23, 1992. _____________________________________________________________________ 2 3. Recasting the mortgage may be appropriate by modifying the amortization provisions of the mortgage to recast the total unpaid amount due under the mortgage to become the new principal balance due over the remaining term of the mortgage. 4. Waiving any late payment charges should also be considered by mortgagees if the mortgagor's payment is late due to the base closing, or the mortgagor needs additional time to begin receiving a pending benefit check. 5. Credit Bureau Reporting should be temporarily suspended if the mortgagor's delinquency is attributable to hardships he or she incurred as a result of a base closing. 6. The Pre-foreclosure sale program enables a homeowner experiencing financial hardship and facing foreclosure to sell the property to a third party at the current fair market value before foreclosure occurs. Upon receipt of a claim for insurance benefits, HUD will pay the difference between the sales proceeds and the remaining debt. The program is currently in a "demonstration" phase and is officially implemented in five HUD Offices: the Atlanta and Denver Regional Offices and Milwaukee, Houston and Phoenix Field Offices. All other HUD Field Offices have the option of participating in the program on a case-by-case basis and many are actively processing applications. Homeowners who are directly affected by a base closing, should be directed to contact the local HUD Office for information regarding the availability of the program in his/her area, or call the HUD Pre-foreclosure Sale Program information line at 1-800-800-3088. The Department anticipates that the program will be implemented nationwide in early 1994 (calendar year). Information regarding the expansion of the program will be issued at that time. 7. Deed-in-Lieu of Foreclosure may be accepted from those mortgagors directly affected by a base closing when other methods of relief cannot be accomplished and the applicable criteria are met. The mortgagee may pay the mortgagor a consideration of up to $500 for conveying title by deed and receive full reimbursement for the amount paid to the mortgagor on its claim for insurance benefits. II. PROCESSING ASSIGNMENT APPLICATIONS. Mortgagees must use the following guidelines when evaluating assignment criteria where a base closing directly affected the mortgagors financial ability to make the mortgage payment. _____________________________________________________________________ 3 1. The Circumstances Criterion. The Department considers that mortgagors affected by a base closing meet the circumstances criterion. However, the mortgagor must provide documentation indicating that it is more likely than not that the base closing affected his or her ability to pay the mortgage and eliminate the delinquency. For example, a mortgagor who was terminated from his or her job for gross misconduct after the announcement of a base closing would not meet the circumstances criterion. However, if the mortgagor was laid off after the announcement of a base closing, it is more likely than not that the employer decided to reduce its workforce in response to the announcement of the closing. All reasonable doubts must be resolved in favor of the mortgagor. 2. The Reasonable Prospects Criterion. The Department considers that mortgagors affected by a base closing meet the reasonable prospects criterion because of their employment history. As with the circumstances criterion, the Department will resolve all reasonable doubts in favor of the mortgagor. The Department appreciates your cooperation and your attention to the recommendations contained in this Mortgagee Letter. Servicers are reminded to document fully their mortgage files regarding all servicing actions relating to a base closing. Questions pertaining to this Mortgagee Letter should be directed to the HUD Field Office which has jurisdiction over the properties affected by a base closing. Sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing - Federal Housing Commissioner *U.S. G.P.O.:1993-301-054:80202