Mortgagee Letter supports the Biden-Harris Administration’s efforts to increase the supply of affordable housing and expand access to homeownership for low- and moderate-income homebuyers.
The Federal Housing Administration (FHA) announced on Thursday that it published Mortgagee Letter (ML) 2022-08, Expanding Affordable Housing Supply Through FHA’s Claims Without Conveyance of Title. The ML adds an initial 30-day exclusive sales period for Claims Without Conveyance of Title (CWCOT) post-foreclosure sales for owner-occupants, HUD-approved nonprofits, and governmental entities. The 30-day exclusive period gives these specified buyers an opportunity to bid on foreclosed properties before investors are allowed to bid during the CWCOT post-foreclosure sales period. The ML also extends the mortgagee’s conveyance timeframe to provide these buyers additional time to obtain financing and complete the sale.
On September 1, 2021, President Biden announced steps HUD would take to make more single family homes available to individuals, families, and nonprofits rather than large investors by prioritizing homeownership and creating exclusive listing or bidding periods for targeted buyers. This change to FHA’s CWCOT program directly supports that goal.
“This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low, making it difficult for individuals and families to achieve the dream of homeownership,” said Principal Deputy Assistant Secretary for Housing and the Federal Housing Administration Lopa P. Kolluri.
Mortgagees will be required to report the Delinquency/Default Status (DDS) Codes that apply to the CWCOT or CWCOT Post-Foreclosure Sale at the end of each reporting cycle in the Single Family Default Monitoring System (SFDMS). The updated SFDMS Reporting Codes and Reporting Data Elements document will be available on the Single Family Housing Policy Handbook 4000.1 Supplemental Documents web page.
The provisions of the ML may be used immediately, but must be used for all post- foreclosure sales associated with defaulted FHA-insured Mortgages scheduled to occur on or after 90 days from the publication date of the ML.
About FHA’s Claims Without Conveyance of Title Program
CWCOT is an FHA claim option through which insurance benefits are paid to a mortgagee after the sale of the property to a third-party purchaser at foreclosure of the FHA-insured mortgage or through post-foreclosure sales efforts. This means there is no conveyance of the property to the HUD in exchange for payment of the mortgage insurance benefit.