The Department of Housing and Urban Development asked mortgage servicers and other stakeholders to respond quickly to a proposed set of foreclosure-sale policy improvements so it can finalize them soon.
"We'd like the feedback in two weeks," Dror Oppenheimer, senior adviser to the assistant secretary for housing-federal housing commissioner at HUD, told attendees at the Mortgage Bankers Association's national servicing conference. Comments on the
The industry has long pressed for improvements to the "claims without conveyance of title" process that servicers of Federal Housing Administration-insured loans often use to sell distressed properties, and the FHA now aims to deliver it in line with
Among other things, the proposal aims to address a concern related to appraisal policies used to set pricing parameters used in foreclosure sales of properties.
Currently, a preforeclosure appraisal based only on the exterior of an occupied home can be used in calculations that determine when a foreclosure sale bid is high enough to sell to a buyer other than the servicer, but that appraisal can't be updated if the property is vacated later.
Under the proposed changes, if a home becomes vacant prior to a sale, servicers would be able to get a second appraisal based on both an exterior and interior evaluation of the property, and use that in conjunction with calculations related to setting the bar for acceptable sale prices.
Generally, if a private-market bidder's price is high enough, a servicer can sell directly to that bidder either at the time of the foreclosure sale or in a subsequent "second chance" auction, and submit certain expenses associated with the sale to FHA for reimbursement.
If no private-market bidder's price is high enough, the servicer must purchase at a formula-based price that takes into account the value of the property and debt owed, but the servicer can subsequently convey the title to HUD, at which point HUD takes responsibility for selling the property.
Properties with certain types of damage cannot be sold through the CWCOT process, and HUD will only take possession of properties if they are in "conveyable condition."
Other policy changes in the FHA's proposed mortgagee letter include one that would allow new types of costs to be submitted for reimbursement. HUD in its policy draft also proposes to update its allowable fee structure and more frequently adjust pricing factors in its FHA Connection system.
