FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Initiation of Foreclosure and Reasonable Diligence Time Frames (03/25/2024)

FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Initiation of Foreclosure and Reasonable Diligence Time Frames (03/25/2024)

d. Initiation of Foreclosure and Reasonable Diligence Time Frames (03/25/2024) i. Initiation of Foreclosure (A) Case Numbers Assigned before September 19, 2017 If a HECM has not been satisfied or the default cured in response to a Due and Payable notification to the Borrower, the Mortgagee must commence foreclosure by taking the first legal action identified in Appendix 6.0 as required by the state in which the Property is located. The first legal action to initiate foreclosure must occur: • no later than six months after the earliest of either: • the death of the last surviving Borrower, unless there is an applicable Deferral Period; • the end of any applicable Deferral Period; or • the Mortgagee’s notice to the Borrower that the HECM is Due and Payable when the HECM is Due and Payable for reasons other than death; or • within an extended time frame as approved by HUD. If federal bankruptcy law or the laws of the state, city, or municipality in which the HECM Property is located do not permit the commencement of foreclosure within the above referenced time frame, the Mortgagee must commence foreclosure within six months after the period during which foreclosure is prohibited by such laws. Where state privacy laws impair the Mortgagee’s ability to acquire relevant information about the death of a Borrower or an Eligible NBS, the Mortgagee must initiate foreclosure within three months from the date of the expiration of such period of impairment. (B) Case Numbers Assigned on or after September 19, 2017 If a HECM has not been satisfied or the default cured in response to a Due and Payable notification, the Mortgagee must commence foreclosure by taking the first legal action identified in Appendix 6.0 as required by the state in which the Property is located. The first legal action to initiate foreclosure must occur: • no later than six months after the earliest of either: • the date the Mortgagee notifies, or should have notified, HUD of the death of the last surviving Borrower unless there is an applicable Deferral Period; • the end of any applicable Deferral Period; • HUD’s Due and Payable approval when the HECM is Due and Payable for reasons other than death; or • the date the Mortgagee notifies, or should have notified, HUD of the conveyance of all title and no Borrower remains on title to the Property; or • within the extended time frame as approved by the Secretary. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1504 Last Revised: 11/26/2025 If federal bankruptcy law or the laws of the state, city, or municipality in which the HECM Property is located do not permit the commencement of foreclosure within the above referenced time frame, the Mortgagee must commence foreclosure within six months after the time during which foreclosure is prohibited by such laws. Where state privacy laws impair the Mortgagee’s ability to acquire relevant information about the death of a Borrower or an Eligible NBS, the Mortgagee must initiate foreclosure within three months from the date of the expiration of such period of impairment. (C) Required Documentation The Mortgagee must provide notice to HUD via HERMIT within 30 Days of initiating foreclosure using the appropriate timeline. ii. Reasonable Diligence in Prosecuting Foreclosure The Mortgagee must exercise reasonable diligence in prosecuting foreclosure proceedings from first legal action to completion, as indicated by acquiring title to and possession of the Property. Appendix 6.0 provides the Reasonable Diligence Time Frame established by HUD for each state. iii. Available Extensions (A) Borrower-Initiated Requests for Extensions to Sell the Property or Otherwise Satisfy the HECM The Borrower or other party holding legal title to the Property may request additional time to: • market and sell a Property securing a HECM if evidence can be provided demonstrating: • the Property is being actively marketed; or • closing or payoff delays associated with an executed sales contract; or • satisfy a HECM if evidence can be provided demonstrating attempts to satisfy the HECM balance. If the Mortgagee receives such a documented request, the Mortgagee must submit a 90-Day extension request with documentation to HUD through the appropriate HERMIT timeline. The Mortgagee may submit no more than two 90-Day Borrower- initiated extension requests under this section. (B) Mortgagee Extension after Borrower’s Failure to Sell or Satisfy the HECM The Mortgagee may utilize one 90-Day extension to commence foreclosure following a fully documented, failed attempt by the Borrower, or the Borrower’s estate or heir, or other party with legal authority to sell the Property or otherwise satisfy the HECM. The Mortgagee must include in the Servicing File evidence of the active marketing of III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1505 Last Revised: 11/26/2025 the Property or attempts to satisfy the HECM balance, and document the use of the extension when submitting the claim. This extension is provided only for the Mortgagee’s operational purposes of meeting the deadline for taking first legal action to foreclose. (C) Mortgagee Extension for Property Charge Loss Mitigation Where the Mortgagee is willing to offer the Borrower an available Loss Mitigation Option, the Mortgagee may request a property charge loss mitigation extension to the foreclosure time frame in HERMIT using the appropriate timeline, provided all requirements established in this section are met. Any approved extension of the foreclosure time frames ceases immediately if, at any point, the Mortgagee determines: • that no Loss Mitigation Options are viable; • the Borrower is unwilling to reimburse the property charge payments advanced on their behalf evidenced either by self-certification or non- communication with a Mortgagee for 60 Days; • the Borrower is unable to cure the default; or • the last surviving Borrower dies. Any request for an extension to a foreclosure time frame due to the Mortgagee’s election to offer a permissible Loss Mitigation Option under this section must include documentation that the eligibility requirements have been met. (D) Mortgagee Extension for Borrower Participation in Local, State, or Other Government Property Charge Assistance Programs (1) Definition Local, State, or Other Government Property Charge Assistance Programs, for purposes of HECM, refers to funds available from state agency programs to assist Borrowers with resolving property charge defaults. The funds from these programs are a lump sum provided to the Mortgagee to be used to cure the Borrower’s default. (2) Standard When a Borrower is receiving funds through a local, state, or other government property charge assistance program, the Mortgagee may request a 60-Day extension to the time frames for commencing foreclosure or reasonable diligence in completing foreclosure, provided that: • the Mortgagee receives notification from the local, state, or other government property charge assistance program, that the Borrower has applied for funds; III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1506 Last Revised: 11/26/2025 • the Mortgagee obtains a copy of the Borrower’s approval from the state Housing Finance Agency (HFA) or other entity administering a state’s program; or • the program requires a foreclosure action to be suspended. If the Mortgagee elects to pursue this extension, the Mortgagee must submit the request with documentation to HUD using the appropriate HERMIT timeline. The program funds must be received and applied within the 60-Day extension period. After a property charge default is cured, the Mortgagee must request rescission of the HECM’s Due and Payable approval through the appropriate timeline in HERMIT. If the program funds are not received, are not disbursed on behalf of the Borrower, or do not adequately cure the default within the 60-Day extension period, the Mortgagee must proceed in accordance with the applicable foreclosure time frames. The Mortgagee must retain documentation regarding any local, state, or other government property charge assistance program-related delay in initiating or completing foreclosure in its Servicing File in order to avoid curtailment. iv. Curing the Default (A) To Reinstate the HECM At any time prior to a foreclosure sale, the Mortgagee must permit the Borrower to cure the default and reinstate the HECM, unless: • the Mortgagee has accepted reinstatement of the HECM within the past two years immediately preceding the current notification to the Borrower that the HECM is Due and Payable; • reinstatement will preclude foreclosure if the HECM becomes Due and Payable at a later date; or • reinstatement will adversely affect the priority of the HECM lien. The Mortgagee may require the Borrower to pay any foreclosure costs and reasonable attorney fees incurred in connection with a canceled foreclosure by adding the expenses to the outstanding HECM balance. (B) To Reinstate a Deferral Period At any time prior to a foreclosure sale, the Mortgagee must permit an Eligible NBS to cure the condition that resulted in the Deferral Period ceasing, and reinstate the Deferral Period, unless: • the Mortgagee has reinstated the Deferral Period within the past two years immediately preceding the latest notification to the Eligible NBS that the HECM is Due and Payable; • reinstatement of the Deferral Period will preclude foreclosure if the HECM becomes Due and Payable at a later date; or III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1507 Last Revised: 11/26/2025 • reinstatement of the Deferral Period will adversely affect the priority of the first and second HECM liens. To reinstate the Deferral Period, the Mortgagee may require the Eligible NBS to pay any costs the Mortgagee incurred in connection with a canceled foreclosure. The Mortgagee must not add these costs to the outstanding HECM balance. v. Bidding at Foreclosure Sale At the foreclosure sale, the Mortgagee must bid the lesser of: • the full debt, consisting of the outstanding HECM balance and any and all other incurred expenses; or • the current appraised value of the Property. vi. Deed-in-Lieu of Foreclosure (A) Definitions A Deed-in-Lieu (DIL) of Foreclosure is an option for a property owner to deed a mortgaged Property to the Mortgagee in lieu of the Mortgagee taking title through a foreclosure action. Due and Payable Date refers to the date when the Mortgagee notifies or should have notified the Commissioner that the Mortgage is Due and Payable under the conditions stated in the Mortgage or the date that a Deferral Period ends, or the date the Commissioner approved a Due and Payable request submitted by the Mortgagee. (B) Standard The Mortgagee must accept a DIL of Foreclosure from the Borrower or other party with legal right to dispose of the Property provided: • the Mortgagee is able to obtain good and marketable title; and • for HECMs with FHA case numbers assigned on or after September 19, 2017, the Mortgagee files the DIL of Foreclosure for recording within nine months of the due date. Within 30 Days of receipt of the executed and delivered DIL, the Mortgagee must: • deliver to the Borrower the canceled Note; • record the satisfaction of the HECM lien; and • where applicable, request that HUD release the second HECM lien. vii. Cash for Keys Consideration (A) Definition Cash for Keys refers to a monetary consideration offered as an incentive to expedite a DIL, a Short Sale, or as an alternative to legal eviction III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1508 Last Revised: 11/26/2025 (B) Standard The Mortgagee may offer the Cash for Keys where: • the Borrower or other party with a legal right to do so vacates the Property and provides a DIL to the Mortgagee; • the Borrower or other party with a legal right to do so sells the Property as a Short Sale consistent with FHA requirements; or • all occupants vacate the Property prior to an eviction completed by the Mortgagee. The Mortgagee must send a Cash for Keys offer letter using a delivery method that provides the date of delivery. The date of the Cash for Keys offer letter for determining the amount of the Cash for Keys incentive is the date the offer is received by the Borrower or occupants of the Property. The total claim calculated before the addition of any incentive or Cash for Keys must not exceed the MCA. The total claim, including any claimable incentive or Cash for Keys, must not exceed the FHA Statutory MCA for the HECM. The Statutory MCA means the mortgage limit for a one-family residence secured by a HECM as of the date of loan closing. The amount of Cash for Keys may not exceed the amounts described in the table below: Cash For Keys Incentives Incentive Type Time Frame Incentive DIL Completed within 365 Days from Due and Payable Date $7,500.00 + probate costs not to exceed $5,000.00 (Any probate costs claimed over $500.00 require supporting documentation.) Completed 366 Days to 547 Days from Due and Payable Date $5,000.00 + probate costs not to exceed $5,000.00 (Any probate costs claimed over $500.00 require supporting documentation.) Short Sale Completed within 365 Days from Due and Payable Date $7,500.00 + probate costs not to exceed $5,000.00 (Any probate costs claimed over $500.00 require supporting documentation.) III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1509 Last Revised: 11/26/2025 Cash For Keys Incentives Completed 366 Days to 547 Days from Due and Payable Date $5,000.00 + probate costs not to exceed $5,000.00 (Any probate costs claimed over $500.00 require supporting documentation.) Post-Foreclosure Eviction Avoidance If the Property is vacated within 60 Days of the Cash for Keys offer $7,500.00 If the Property is vacated within 90 Days of the Cash for Keys offer $5,000.00 Before releasing the funds for a DIL or a post-foreclosure eviction avoidance incentive, the Mortgagee must inspect the Property to ensure that: • the Property is in Broom-swept Condition; and • all built-in appliances and fixtures remain in the Property. Allowable probate costs are court costs, attorney’s fees, notary fees, fees for required notices, and mailing/copy fees. (C) Required Documentation Where Cash for Keys is offered in relation to a DIL, the Mortgagee must provide documentation with the claim in HERMIT showing the date and amount of consideration offered, along with the date: • the DIL was executed and returned to the Mortgagee; • the DIL was filed for recording; • the occupant vacated the Property; and • the occupant received the funds. Where Cash for Keys is offered as part of a Short Sale, the Mortgagee must provide documentation with the claim in HERMIT showing: • the date of the sale closing; • the date and amount of the offer; and • the date the occupant received the funds. Where Cash for Keys is offered to an occupant as an alternative to eviction post- foreclosure, the Mortgagee must provide documentation with the claim in HERMIT showing: • the date of the foreclosure sale; • evidence the Mortgagee was the successful bidder; • the date and amount of the relocation offer; III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1510 Last Revised: 11/26/2025 • the date of the actual vacancy; and • the date the occupant received the funds. Mortgagees must provide supporting documentation for any probate costs over $500.00 as part of their claim by uploading the documentation into the HERMIT system.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Initiation of Foreclosure and Reasonable Diligence Time Frames (03/25/2024) · source URL · snapshot 8c03836f77f317e1