FHA Enhances Foreclosure Bid Methodology for Its Claims Without Conveyance of Title Program

FHA recently published a reminder concerning the bidding process for its Claims Without Conveyance of Title (CWCOT) program.  The CWCOT program allows mortgagees to market the property through post-foreclosure sale to third-parties, rather than conveying title of the property to HUD following a foreclosure.  A key component of the CWCOT program is the Commissioner’s Adjusted Fair Market Value (CAFMV), which represents HUD’s estimated market value of a property, factoring in potential expenses and risks associated with resale. Mortgagees are required to bid at either the CAFMV or the state-mandated foreclosure price, whichever is applicable, during foreclosure sales and post-foreclosure “second chance” sales.

To further refine the CWCOT program and enhance the accuracy of foreclosure sale bids, FHA updated its “haircut” methodology on July 17, 2025. These “haircuts” are adjustments to the CAFMV that take into account anticipated costs, such as repairs and marketing. FHA has improved the geographic granularity of these adjustments, moving from state-wide adjustments, to more precise Metropolitan Statistical Area (MSA)-specific adjustments, where data permits. With this update, FHA expects fewer instances where a mortgagee’s total debt is lower than the CAFMV, thereby lessening the financial burden on mortgagees.

These enhanced haircut methodologies are scheduled to take effect for foreclosure sales and post-foreclosure sales efforts scheduled on or after September 15, 2025.