The porpose of this Mortgagee Letter is to clarify the time frame requirements for the FHA Loss Mitigation iniciatives. This clarification will address reinstatement loss mitigation claims specifically and will identify several minor procedures changes. These procedural changes shall be applicable for all reinstament Loss Mitigation claims on or after the date of this Mortgagee Letter.

In Mortgagee Letter 00-05, dated January 19, 2000, HUD identified the minimum delinquency for use of both Special Forbearance and Loan Modification as three months. In the discussion regarding Special Forbearance, the Departament had also given reference to a minimum delinquency of 90 days. Depending upon interpretations appear to be in conflict.

Effective on the date of this Mortgagee Letter, HUD will define the minimum delinquency for both the Special Forbearance iniciative and the Loan Modification iniciative as three months. Simply stated, three payments must be due and unpaid. See exemples:

For cases where the mortgagee was not barred from initiating foreclosure (or otherwise meeting the requirements of 24 CFR 203 355) within six months from the date of default (and no extension was approved), interest will be curtailed on any subsequent conveyance to six months from the date of default regardless of any subsequent Special Forbearance that may have been executed.

An additional issue regarding the maximum time frame relates to accounts where the mortgagee waited until after the first day of the 12th month of delinquency to execute a Special Forbearance. This situation create both procedural and system related problems as the arrearage appeared to exceed the 12 month maximum. Therefore those Special Forbearance claims could not be processed.

To ensure that all Special Forbearance incentive claims may be processed in a timely manner, the Department will be requesting additional documentation including a copy of the executed forbearance agreement to support those Special Forbearance plans that are executed between the first and the last day the 12th month of delinquency. These procedures will affect those Special Forbearance claims filed on or after the date of this Mortgagee Lettrer.

Mortgagees shall continue to file the Special Forbearance claims, preferably via the FHA Connection. As the Department begins processing of the claim, a request will be sent by Claims for the mortgagee to forward supporting documentation (including a copy of the Special Forbearance Agreement and a copy of the loan history). Upon receipt, the claims representative will confirm that the Special Forbearance agreement does not allow the mortgage arrearage to exceed twelve months. Do not forward any supporting documentation unless requested. This procedure will ensure that the documentation can be directed to the specific individual that is processing the case.

In Mortgagee Letter 00-05, dated January 19, 2000, HUD identified the minimum delinquency for a Partial Claim as four months. In the discussion regarding Partial Claim, the Department had also given reference to a minimum delinquency of 120 days. Depending upon interpretation, these instructions appear to be in conflict.

Effective on the date of this Mortgagee Letter, HUD will define the minimum delinquency for the Partial Claim iniative as four months. Simply stated, four payments must be due and unpaid. See exemples: