FHA Single Family Housing Policy Handbook 4000.1, Part IV — e. Claim Type 07 - Pre-Foreclosure Sales (09/26/2022)

FHA Single Family Housing Policy Handbook 4000.1, Part IV — e. Claim Type 07 - Pre-Foreclosure Sales (09/26/2022)

e. Claim Type 07 - Pre-Foreclosure Sales (09/26/2022) The Mortgagee may file a claim for a PFS incentive and insurance benefits under Claim Type 07. i. Computation of Interest (A) Standard HUD will pay debenture interest as follows: • on the unpaid principal balance from the date of Default to the date of the closing of the PFS; • on the difference between the unpaid principal balance, plus allowable costs and advances, and the net PFS proceeds from the date of the closing of the PFS to the date of claim settlement; • on allowable costs and advances from the date of expenditure to the date of the closing of the PFS; and • when a Default under an SFB-Unemployment Agreement or SFB Agreement is involved, from the last date of the mortgage interest calculation to the date of the closing of the PFS. (B) Calculating Interest for an Expenditure The Mortgagee must calculate the amount of interest to be claimed for an expenditure as follows: • multiply the Daily Interest Rate Factor (see Appendix 8.c Daily Interest Rate Factor in the Claim Filing Technical Guide) by the amount paid; then • multiply this result by the number of Days from the date paid (or Default date, if later) for each Item to the date of closing of the PFS, as listed in Item 10. ii. Computation of Claim Amount (A) Allowable Costs HUD will reimburse the Mortgagee for reasonable and customary costs as follows. (1) Mortgagee Advances for Escrow Funds The Mortgagee may claim reimbursement for advances of escrow funds as provided for in Escrow Funds. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1613 Last Revised: 11/26/2025 (2) Property Preservation and Protection Costs The Mortgagee may claim reimbursement for the cost of inspections and P&P actions performed in accordance with HUD guidance for the current Default, for costs incurred before the Closing Date of the PFS. (3) Taxes, Assessments, Hazard Insurance, and Other Allowable Items The Mortgagee may claim reimbursement for disbursements for taxes, assessments, Hazard Insurance and other allowable items payable which were not satisfied at closing. HUD will only reimburse property-related costs which were incurred before the PFS Closing Date. (4) Attorney’s Fees for Postponed Foreclosure For a foreclosure that was postponed pending the successful completion of the PFS, the Mortgagee may claim reimbursement for attorney fees commensurate with the work actually performed up to the point of the cessation of the legal action, not exceeding 75 percent of the amount established as reasonable and customary in Appendix 5.0 – HUD Schedule of Standard Possessory Action and Deed-In-Lieu of Foreclosure Attorney Fees (applies to Servicing only). (5) Satisfaction of Junior Liens The Mortgagee may claim reimbursement for the amounts paid to satisfy or release junior liens Paid Outside Closing (POC), as long as these amounts are not included in the Closing Disclosure or similar legal document. (6) Appraisal and Title Search The Mortgagee may claim reimbursement for reasonable and customary costs of the appraisal, Broker’s Price Option (BPO) or Automated Valuation Model (AVM), and title search, if not included in the Closing Disclosure or similar legal document. (7) Borrower Consideration The Mortgagee may not claim reimbursement for the amount of the PFS Borrower Consideration, which is to be included on the Closing Disclosure. (8) PFS Incentive Payment HUD will pay the Mortgagee a financial incentive for the use of the PFS Option in compliance with all regulatory requirements and procedures relating to the submission of incentive claims in FHAC. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1614 Last Revised: 11/26/2025 (B) Disallowable Costs HUD will not reimburse the Mortgagee for the following costs. (1) Items Already Included on Closing Disclosure The Mortgagee may not claim reimbursement for costs that have already been included on the Closing Disclosure or similar legal document. (2) Eviction Costs The Mortgagee may not claim reimbursement for any costs incurred to evict residents from the mortgaged Property. (3) Property Preservation and Protection Costs Incurred after Closing The Mortgagee may not claim reimbursement for Property P&P costs incurred after the date of closing of the PFS. (4) Hazard Insurance Premiums Paid after Closing The Mortgagee may not claim reimbursement for hazard insurance premiums for the period after the PFS closing. (C) Deductions from Claim Amount HUD will deduct the following items from the total claim amount. (1) Money Received after Closing HUD will deduct all amounts received by the Mortgagee on the Mortgage after closing of the PFS. (2) Rent or Other Income HUD will deduct from the claim any amount by which Rental Income exceeds rental expenses. (3) Money Retained by Mortgagee HUD will deduct from the claim any amounts retained by the Mortgagee for the Borrower’s account which have not been applied to reduction of principal. (4) Sales Proceeds HUD will deduct from the claim amount all amounts received by the Mortgagee relating to the sale of the Property. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1615 Last Revised: 11/26/2025 iii. Extensions to the Time Requirement to Initiate Foreclosure To reflect the use of HUD’s automatic extension to the time requirement to initiate foreclosure in order to utilize a PFS, the Mortgagee must enter into form HUD-27011: • the ending date of the terminated or failed PFS transaction in Item 20 of Part A; and • in Item 19, a date that is no more than 90 Days after the date listed in Item 20. iv. Submission of Claim Form Parts to HUD for PFS The Mortgagee must submit Parts A and B simultaneously to HUD no later than 30 Days after the PFS Closing Date and retain the original Parts in the Claim File. If submitting the claim via FHA Catalyst, the Mortgagee must submit Parts A through E.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part IV — e. Claim Type 07 - Pre-Foreclosure Sales (09/26/2022) · source URL · snapshot 8c03836f77f317e1