Changes to FHA’s Occupied Conveyance Procedures (3/16/12) (ML 2012-06)

Link to Mortgagee Letter »

Notable Date:

• July 1, 2012 – December 31, 2014

Industry Participants Affected:

• All Approved Mortgagees, Single-Family Servicing Managers

Synopsis:

This mortgagee letter sets forth temporary changes to FHA’s Occupied Conveyance Procedures as a result of the Protecting Tenants at Foreclosure Act of 2009 (PTFA). The changes will expire with the sunset of PFTA on December 31, 2014.

Occupied Conveyance and PTFA Process Mortgagees must comply with PTFA requirements and state and local law in addition to following HUD’s occupied conveyance procedures. Before completion of foreclosure, the mortgagee must 1) Confirm the identity of all occupants; 2) Determine each occupant’s possible rights for continued occupancy under HUD’s occupied conveyance procedures; and 3) Send occupants the PTFA-revised Notice to Occupant of Pending Acquisition (NOPA) 60 to 90 days before the mortgagee expects to acquire title.

If HUD grants occupied conveyance, the mortgagee shall convey the property occupied under HUD’s normal occupied conveyance procedures. If HUD denies occupied conveyance, the mortgagee should determine if PTFA is applicable (i.e., whether there is a bona fide lease or tenancy), or if there is some other occupancy protection under state or local law that would require the mortgagee to delay possessory action. If PTFA is applicable, the mortgagee must follow PFTA requirements before evicting the occupant, and must attempt to obtain documentation of existing leases and tenancies for the claim file as evidence of the PTFA applicability and the extra time needed to comply with PTFA.

Revised Notice to Occupants of Pending Acquisition (NOPA) The revised NOPA shall 1) Provide a summary of the conditions under which continued occupancy is permissible; 2) Provide other information as specified in 24 CFR § 203.675(b); and 3) Be sent via certified mail or with a signature confirmation service to ensure receipt of the notice by occupants. A sample NOPA has been provided. The mortgagee must submit an electronic copy of each NOPA to HUD’s Mortgagee Compliance Manager (Michaelson, Connor, and Boul, contact information provided below) along with all other lease and tenancy documentation. All NOPA notices and related documentation must be uploaded to HUD’s internet portal for mortgagees, P260.

Additional Time for Compliance with PFTA The additional time needed to obtain possession of a property as a result of PFTA is taken into account when evaluating compliance with HUD's "reasonable diigence" time frame for foreclosure. Once tenancy protection under PFTA has expired, the mortgagee is expected to proceed swiftly with possessory actions.

Rent Collection Mortgagees must attempt to collect rents payable under bona fide leases and tenancies, and in the event of default, must take possessory action pursuant to the rental contract terms and applicable law. Any rents received during the term of the bona fide lease or tenancy must be reflected as a credit on line 115 of Form HUD-27011, Single-Family Application for Insurance Benefits.

Preservation and Protection Costs due to Compliance with PTFA Additional routine preservation and protection costs such as lawn maintenance and inspections under the extended PTFA lease or tenancy will be reimbursed (as per procedures outlined in ML 2010-18).

How does it change or benefit the industry:

The temporary provisions to FHA’s Occupied Conveyance Procedures are designed to comply with PFTA and provide some protection to tenants who are at risk of foreclosure. This mortgagee letter contains three useful attachments: a sample NOPA, HUD’s Conditions for Continued Occupancy, and HUD's Temporary Nature of Continued Occupancy. For questions please contact HUD's National Servicing Center at (877) 622-8525. 

HUD's Mortgagee Compliance Manager Michaelson, Connor, and Boul 4400 Will Rogers Parkway, Suite 300 Oklahoma City, OK 73108 Phone: (877) 517-4488 Local: (405) 595-2000 Email: mcm-info@mcbreo.com

Link to Mortgagee Letter »

About this AllRegs HUD Mortgagee Letter Synopsis:

Brought to you by AllRegs, this synopsis is intended as a “snap-shot” of the ML 2012-06, but should not be substituted for the entire contents of the actual Mortgagee Letter published by HUD.

Provided to you by Bankers Advisory, a quality control and compliance audit services company.  Bankers Advisory authors state compliance matrices, policy manual templates and compliance commentaries exclusively for AllRegs.