FHA Single Family Housing Policy Handbook 4000.1, III. SERVICING AND LOSS MITIGATION > B. Title II Insured Housing Programs Reverse Mortgages > 2. Default Servicing — f. Claims

i. Claim Guidance

(A) Claim Not Permitted after Satisfaction of a HECM by Payoff A Mortgagee must not file a claim for insurance benefits when the HECM is satisfied in full. A bid by any party other than the Mortgagee at a foreclosure sale for the full debt, consisting of the outstanding HECM balance and any and all other incurred expenses, will result in a full Payoff of the HECM. In such cases, the Mortgagee must not file a claim for insurance benefits.

(B) Contract of Insurance Not Terminated The Mortgagee may only file a claim for insurance benefits where the contract of insurance has not terminated.

(C) Time Frames for Filing Claims (1) Case Numbers Assigned before September 19, 2017 The Mortgagee must file a claim within 15 Days of: • the Mortgagee selling the Property acquired through foreclosure or DIL; • a sale by the Borrower or other party with legal right to dispose of the Property; • satisfaction of the HECM by the Borrower’s estate or heir; or • assignment of the HECM to the Secretary. (2) Case Numbers Assigned on or after September 19, 2017 The Mortgagee must file a claim within 30 Days of: • the Mortgagee selling the Property acquired through foreclosure or DIL; • a sale by the Borrower or other party with legal right to dispose of the Property; or • satisfaction of the HECM by the Borrower’s estate or heir. The Mortgagee must file a claim within 15 Days of assignment of the HECM to the Secretary. If the Property will not be sold within six months from the foreclosure sale date where the Mortgagee was the successful bidder, the Mortgagee must file a claim no later than 30 Days after the end of the six-month period. The Mortgagee must use a valid appraisal, substituting the appraised value for the sales price of the Property.

(D) Claims Filed in HERMIT All HECM claims must be filed with supporting documentation in HERMIT using the appropriate timeline. The unpaid principal balance of the HECM is capped as of the due date. The Mortgagee must itemize all allowable expenses incurred after the Due and Payable Date.

(E) Claims Limited by Maximum Claim Amount (1) Case Numbers Assigned before September 19, 2017 In no case may the claim paid exceed the MCA. The interest allowance provided in 24 CFR § 206.129(d)(3)(x), (e)(2), and (f)(2)(i) will not be included in determining the limit on the claim amount. (2) Case Numbers Assigned on or after September 19, 2017 In no case may the claim paid exceed the MCA. The interest allowance provided in 24 CFR § 206.129(d)(3)(x), (e)(2), and (f)(2)(ii) will be made in cash in the amount determined under the regulations and will be included in determining the limit on the claim amount.

(F) Debenture Interest Rate (1) Definitions For purposes of payment of debenture interest, the Date of Default is the Due and Payable Date. The Semi-Annual Rate is the rate in effect for debentures listed at https://www.hud.gov/hud-partners/housing-debenture-interest-rates. The 10-Year CMT Rate is the rate in effect on United States Treasury Securities adjusted to a constant maturity of 10 years listed at https://www.hud.gov/hud- partners/housing-debenture-interest-rates. (2) Standard (a) Mortgages Endorsed before January 23, 2004, Regardless of when a Claim is Filed and Mortgages Endorsed on or after January 23, 2004, with a Due and Payable Date prior to September 19, 2017 The debenture interest rate is the higher of: • the Semi-Annual Rate as of the date the commitment was issued, if applicable; or • the Semi-Annual Rate as of the date the Mortgage was endorsed. (b) Mortgages Endorsed after January 23, 2004, that have a Due and Payable Date on or after September 19, 2017, and before September 28, 2024 The debenture interest rate is the higher of: • the Semi-Annual Rate for the commitment was issued, if applicable; • the Semi-Annual Rate for the month Mortgage was endorsed; or • the 10-Year CMT Rate for the month the Mortgage became Due and Payable. (c) Mortgages Endorsed after January 23, 2004, with a Due and Payable Date on or after September 28, 2024 The debenture interest rate is the 10-year CMT rate for the month the Mortgage became Due and Payable.

(G) Curtailment of Interest for Noncompliance with HUD HECM Program Requirements Causes for curtailment of interest include, but are not limited to, the Mortgagee’s failure to: • timely request due and payable approval from HUD within 30 Days of the occurrence of a Due and Payable event for which HUD approval is needed; • timely provide notice to HUD of the death of the last surviving Borrower or conveyance of title within 60 Days of the occurrence of the Due and Payable event; • timely provide notice to HUD within 60 days after the end of the Deferral Period; • timely provide the required due and payable notice to the Eligible NBS within 30 Days after the end of the Deferral Period; • timely provide the required due and payable notice to the Borrower, their estate, heir, or other party with legal title to the Property that the HECM is Due and Payable within 30 Days of providing notice to HUD of the Due and Payable event or receiving HUD approval when needed; • comply with the required appraisal time frames; • timely commence foreclosure, when applicable; • timely provide notice to HUD after commencing foreclosure, meeting reasonable diligence requirements, or meeting reporting requirements, pursuant to Appendix 6.0 – First Legal Actions to Initiate Foreclosure and Reasonable Diligence Time Frames; and • timely file claims for payment of insurance benefits. The Mortgagee must self-curtail claims for failure to meet any of FHA’s requirements or reasonable diligence time frames of 24 CFR §§ 206.125 and 206.127 except to the extent those time frames are extended by HUD, as authorized by law. In that event, the Mortgagee must self-curtail claims when they fail to comply within the extended time. The Mortgagee must state the reason for curtailment in the “Mortgagee Comments” section of the claim in HERMIT. If the Mortgagee does not self-curtail when reasonable diligence time frames are not met, the Mortgagee must fully document in HERMIT the reasons for delays that were outside of the Mortgagee’s control.

(H) Reporting Use of Mortgagee Extension If applicable, the Mortgagee must enter the expiration date of the 90-Day extension period in the block identified for extensions in the claim in HERMIT and note the use of the extension in the “Mortgagee’s Comments” section.

(I) Mortgagee Incentives FHA will pay an incentive fee to Mortgagees for completion of a Short Sale or a DIL in the amount of $1,500. The Mortgagee must enter the incentive amount in block 305 of form HUD-27011, Single-Family Application for Insurance Benefits.

(J) Probate Costs Where permitted to be paid as a Cash for Keys incentive, probate costs may not exceed $5,000. Any probate costs claimed over $500 require supporting documentation. The probate costs must be reasonable and customary for the area. The Mortgagee must enter the probate costs in block 305 of form HUD-27011.

iv. Short Sale Claims (Claim Type 23) The Mortgagee may file a HECM Short Sale Claim (Claim Type 23) in cases where: • the Borrower sold the Property, but the sales proceeds were insufficient to satisfy the HECM, provided: • the Property was sold for at least the current appraised value if the HECM was not Due and Payable; or • the Property was sold for at least 95 percent of the current appraised value if the HECM was Due and Payable; or • the HECM was extinguished by sale or transfer after death or, if applicable, the end of a Deferral Period, provided the Mortgagee received, in exchange for the extinguishment of the HECM, at least the lesser of: • the HECM balance; or • 95 percent of the current appraised value of the Property.

(A) Claim Calculation – Case Number Assigned before September 19, 2017 The claim amount will include: • the total of the following: • the HECM balance, including any accrued interest, MIP, and servicing fees that have been added to the HECM balance; • any accrued note rate interest, MIP, or servicing fees that have not been added to the HECM balance on the date the deed is recorded; and • the amount of allowances for items set forth in 24 CFR § 206.129(d)(3)(i)–(vii) and (d)(3)(xii) as applicable; • less the proceeds received from the Borrower, the Borrower’s estate, or heir; • plus, if the short sale occurred after the initiation of foreclosure, the total of the items set forth in 24 CFR § 206.129(d)(3)(vi) and (ix), as applicable. The claim will also include debenture interest from the date the deed is recorded to the date when the claim is paid, providing the Mortgagee has complied with all applicable time frames required. Where the Mortgagee has failed to meet any of the applicable requirements within the specified time, or additional time approved by HUD, the interest allowance will be computed only to the date on which the particular action should have been taken or to which it was extended.