On February 24, 2020, FHA announced proposed changes to its Claims Without Conveyance of Title (CWCOT) procedures, which mortgagees must use for all foreclosure sales and any post-foreclosure sale efforts pursued by mortgagees. The revised CWCOT procedures and FHA’s CWCOT Feedback Submission Form are posted on FHA’s Single Family Housing Drafting Table. Comments on the proposed changes are due by March 9, 2020.
CWCOT is a claim option through which mortgagees may submit claims for payment of insurance benefits following the sale of property to a third party at the foreclosure of an FHA-insured mortgage or through a second chance sale. HUD states that with CWCOT, there is no conveyance of the property to HUD in exchange for payment of mortgage insurance benefits. Additionally, the CWCOT procedures expedite the disposition of foreclosed properties and reduce the time period a property sits vacant. According to HUD, the proposed changes will enhance the CWCOT procedures by, in part, doing the following:
- If a property that had an exterior-only appraisal becomes vacant, requiring a mortgagee to obtain a new appraisal that includes both an interior and exterior inspection if: (i) before foreclosure, any delay due to the obtaining of a new appraisal will not cause the foreclosure sale to be cancelled, or (ii) after foreclosure, the mortgagee conducts additional post-foreclosure sales efforts;
- Permitting mortgagees to submit eviction costs and certain eligible property preservation expenses incurred during additional sales opportunities;
- In jurisdictions requiring mortgagees to bid a specific amount at foreclosure, deeming that amount to be the Commissioner’s Adjusted Fair Market Value (CAFMV) for the initial foreclosure, and requiring mortgagees to access the CAFMV link in FHA Connection to determine a property’s CAFMV for use in any post-foreclosure sales efforts; and
- Updating FHA’s policy and allowable fee structure regarding independent third-party providers that conduct foreclosure sale or additional post-foreclosure sales efforts.