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Items included in payment-conveyed and non-conveyed properties. 


Directive Number: 203.402 


 
The insurance benefits paid in connection with foreclosed properties,
whether or not conveyed to the Commissioner; and those properties
conveyed to the Commissioner as a result of a deed in lieu of
foreclosure; and those properties sold under an approved pre-foreclosure
sale shall include the following items:
 
(a) Taxes, ground rent and water rates, which are liens prior to the
mortgage;
 
(b) Special assessments, which are noted on the application for
insurance or which become liens after the insurance of the mortgage.
 
(c) Hazard insurance premiums on the mortgaged property not in excess
of a reasonable rate as defined in Sec. 203.379(a)(4).
 
(d) Periodic MIP or open-end insurance charges;
 
(e) Taxes imposed upon any deeds or other instruments by which said
property was acquired by the mortgagee and transferred or conveyed to the
Commissioner, or was acquired by the mortgagee and retained pursuant to
Sec. 203.368;
 
(f) Foreclosure costs or costs of acquiring the property otherwise
(including costs of acquiring the property by the mortgagee and of
conveying and evidencing title to the property to HUD, but not including
any costs borne by the mortgagee to correct title defects) actually paid
by the mortgagee and approved by HUD, in an amount not in excess of two-
thirds of such costs or $75, whichever is the greater. For mortgages
insured on or after February 1, 1998, the Secretary will reimburse a
percentage of foreclosure costs or costs of acquiring the property, which
percentage shall be determined in accordance with such conditions as the
Secretary shall prescribe. Where the foreclosure involves a mortgage sold
by the Secretary on or after August 1, 1969, or a mortgage executed in
connection with the sale of property by the Secretary on or after such
date, the mortgagee shall be reimbursed (in addition to the amount
determined under the foregoing) for any extra costs incurred in the
foreclosure as a result of a defect in the mortgage instrument, or a
defect in the mortgage transaction or a defect in title which existed at
or prior to the time the mortgage (or its assignment by the Secretary)
was filed for record, if the mortgagee establishes to the satisfaction of
the Commissioner that such extra costs are over and above those
customarily incurred in the area.
 
(g)(1) For mortgages insured under firm commitments issued before
       November 19, 1992, or under direct endorsement processing where the
       credit worksheet was signed by the mortgagee's underwriter before
       November 19, 1992, reasonable payments made by the mortgagee,
       with the approval of the Secretary, for the purpose of protecting,
       operating, or preserving the property, or removing debris from the
       property.
 
(2) For mortgages insured under firm commitments issued on or after
    November 19, 1992, or under direct endorsement processing where the credit
    worksheet was signed by the mortgagee's underwriter on or after November
    19, 1992, reasonable payments made by the mortgagee, with the
    approval of the Secretary, for the purpose of protecting, operating, or
    preserving the property, or removing debris from the property prior to
    the time of conveyance required by Sec. 203.359 of this part.
 
(3) Reasonable costs for performing the inspections required by Sec.
    203.377 of this part and to determine if the property is vacant
    or abandoned are considered to be costs of protecting, operating
    or preserving the property.
 
(h) Any uncollected mortgage interest allowed pursuant to an approved
    forbearance plan;
 
(i) An amount which the Commissioner finds to be sufficient to compensate
    the mortgagee for any loss which it may have sustained on account
    of interest on debentures and the payment of any MIP and open-end
    insurance charge by reason of its having postponed the institution of
    foreclosure proceedings or the acquisition of the property by other means
    under a mortgage to which the provisions of sections 302 and 306 of the
    Soldiers and Sailors Civil Relief Act of 1940, as amended,
    apply during any part or all of the period of the mortgagor's military
    service and three months thereafter;
 
(j) Charges for the administration, operation, maintenance or repair
of community-owned property or the maintenance and repair of the
mortgaged property paid by the mortgagee with respect to which it
certifies to the Secretary that payment was made for the purpose of
discharging an obligation arising out of a covenant filed for record and
approved by the Secretary prior to the issuance of the mortgage; and
charges for the repair of the mortgaged property required by and in an
amount authorized by the Secretary under Sec. 203.379 of this
part;
 
(k)(1) For properties conveyed to the Secretary, an amount equivalent
to the debenture interest which would have been earned, as of the date
such payment is made, on the portion of the insurance benefits paid in
cash, if such portion had been paid in debentures, except that:
 
(i) When the mortgagee fails to meet any one of the applicable
requirements of Secs.  203.355, 203.356(b), 203.359,
203.360, 203.365, 203.606(b)(1), or 203.366 within the specified time and
in a manner satisfactory to the Secretary (or within such further time as
the Secretary may approve in writing), the interest allowance in such
cash payment shall be computed only to the date on which the particular
required action should have been taken or to which it was extended;
 
(ii) When the mortgagee fails to meet the requirements of
Sec. 203.356(a) of this part within the specified time and in a
manner satisfactory to the Secretary (or within such further time as the
Secretary may approve in writing), the interest allowance in such cash
payment shall be computed to a date set administratively by the
Secretary.
 
(2) Where a claim for insurance benefits is being paid without
conveyance of title to the Commissioner in accordance with
Sec. 203.368, an amount equivalent to the sum of:
 
(i) The debenture interest which would have been earned, as of the
date the mortgagee or a party other than the mortgagee acquires good
marketable title to the mortgaged property, on an amount equal to the
amount by which an insurance claim determined in accordance with
203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
 
(ii) The debenture interest which would have been earned, from the
date the mortgagee or a party other than the mortgagee acquires good
marketable title to the mortgaged property to the date when payment of
the claim is made, on the portion of the insurance benefits paid in cash
if such portion had been paid in debentures, except that if the
mortgagee fails to meet any of the applicable requirements of
Secs.  203.355, 203.356, 203.368(i) (3) and (5) of this
chapter within the specified time and in a manner satisfactory to the
Commissioner (or within such further time as the Commissioner may approve
in writing), the interest allowance in such cash payment shall be
computed only to the date on which the particular required action should
have been taken or to which it was extended.
 
(3) Where a claim for insurance benefits is being paid following a
pre-foreclosure sale, without foreclosure or conveyance to the
Commissioner in accordance with Sec. 203.370, an amount
equivalent to the sum of:
 
(i) The debenture interest which would have been earned, as of the
date of the closing of the pre-foreclosure sale, on an amount equal to
the amount by which an insurance claim determined in accordance with
Sec. 203.401(a) exceeds the amount of the actual claim being
paid in debentures; plus
 
(ii) The debenture interest which would have been earned, from the
date of the closing of the pre-foreclosure sale to the date when payment
of the claim is made, on the portion of the insurance benefits paid in
cash if such portion had been paid in debentures, except that if the
mortgagee fails to meet any of the applicable requirements of
Sec. 203.365 within the specified time and in a manner
satisfactory to the Commissioner (or within such further time as the
Commissioner may approve in writing), the interest allowance in such cash
payment shall be computed only to the date on which the particular
required action should have been taken or to which it was extended.
 
(l) Reasonable costs of appraisal under Sec. 203.368(e) or
pursuant to Sec. 203.370;
 
(m) Costs of additional advertising under 203.368(h);
 
(n) Costs of foreclosure as computed in paragraph (f) of this section
where the acquiring party is one other than the mortgagee, as provided in
Sec. 203.368;
 
(o) In any case in which the Commissioner, pursuant to
Sec. 203.369, requires or requests that the mortgagee seek a
deficiency judgment, an amount necessary to reimburse the mortgagee for
those additional costs incurred that exceed the costs of foreclosure. In
those jurisidictions that require the initiation of a judicial
foreclosure action in order to obtain a deficiency judgment, a mortgagee
shall receive full reimbursement for the costs of the foreclosure action,
where, but for the requested deficiency judgment, judicial foreclosure
would not have been necessary.
 
(p) An amount approved by HUD and paid to the mortgagor as
consideration for the execution of a deed in lieu of foreclosure and, if
authorized by HUD, an administrative fee approved by HUD paid to the
mortgagee for its role in facilitating a successful deed in lieu of
foreclosure, not to be subject to the payment of debenture interest
thereon.
 
(q) Reasonable costs incurred in evicting occupants and in removing
personal property from acquired properties;
 
(r) Notwithstanding any other provision in this section, the
mortgagee will not be reimbursed for any expenses incurred in connection
with the property after a reconveyance from the Secretary to the
mortgagee as provided in Sec. 203.363(b) of this part.
 
(s) Reasonable costs of the title search ordered by the mortgagee, in
accordance with procedures prescribed by HUD, to determine the status of
a mortgagor meeting all other criteria for approval to participate in the
pre-foreclosure sale procedure, or to determine if a mortgagor meets the
criteria for approval of the mortgagee's acceptance of a deed in lieu of
foreclosure.
 
(t) The administrative fee as authorized by the Secretary and payable
to the mortgagee for its role in facilitating a successful pre-
foreclosure sale, said fee not to be subject to the payment of debenture
interest thereon.
 
[36 FR 34508, Dec. 22, 1971, as amended at 41 FR 49736, Nov. 10,
1976; 45 FR 56801, Aug. 6, 1980; 48 FR 28806, June 23, 1983; 51 FR 28551,
Aug. 8, 1986; 52 FR 1329, Feb. 13, 1987; 53 FR 4388, Feb. 16, 1988; 57 FR
47974, Oct. 20, 1992; 59 FR 50145, Sept. 30, 1994; 61 FR 35018, July 3,
1996; 61 FR 36266, July 9, 1996; 61 FR 36453, July 10, 1996; 62 FR 60130,
Nov. 6, 1997]



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