FHA wants to revise its foreclosure policies, according to Dror Oppenheimer, senior advisor to assistant secretary for Housing-federal housing commissioner at HUD.  The Mortgage Bankers Association was recently invited to offer comments on the proposed changes through March 9, 2020. 

Currently, a pre-foreclosure appraisal of the property was based only on exterior inspection.  This appraisal (professional opinion of property value) was used to figure out the minimum bid needed to sell to a non-servicer buyer. 

Under the proposed changes, If the property is vacated after the appraisal was made, the appraiser could perform a second appraisal that included an interior examination of the property, to determine a more accurate minimum sales price when the property is liquidated, or sold in a foreclosure sale.

So, what does this have to do with CWCOT?

If a private market bidder’s price is high enough, a servicer can sell directly to that bidder either in the foreclosure sale, or in a later second chance auction of the property.  If there is no private market bidder, the servicer must use a formula based price to purchase the property back, which clears the title, so the servicer can convey the title to HUD.  HUD would then handle the sale of the property.  This is called CWCOT (claims without conveyance of title) and only properties in condition to be resold can be processed in this way.

The changes proposed, including expansion of fees which can be submitted for reimbursement, are intended to reduce the lender and insurer’s costs of foreclosure and to improve FHA’s recoveries on assets sold through CWCOT.  Mortgage companies may now submit eviction costs for reimbursement from HUD, as well as certain property preservation expenses during sales opportunities.  In short, HUD is making it easier for mortgage companies to clear the property and sell it after the foreclosure process is completed.  This may shorten the foreclosure process, cutting costs for both servicers and FHA/HUD.

For Borrowers, it may mean a smaller window to defend against foreclosure.  If you are facing foreclosure yourself, visit wrongfullyforeclosed.com to find an experienced foreclosure defense lawyer in your area.