Bulletin: NL000053

Dear Associates:

Enactment

The HUD Single Family Mortgage Foreclosure Act (Act) was enacted September 28, 1994. The regulations became effective December 15, 1995.

Effect of Act

The Act applies to one-to-four family mortgages held by HUD.

It allows HUD, at its option, to conduct nonjudicial foreclosures of these mortgages under federal law. HUD may continue to foreclose under state law, at its option. If HUD forecloses under state law, verify compliance with state law.

The Act applies to mortgages executed before or after the Act.

The foreclosure under federal law is conducted by a foreclosure commissioner. The commissioner must be a resident of the state where the land is located.

The sale under federal law occurs at the customary place for foreclosure or at the courthouse in the county or at the land site.

If the foreclosure occurs under federal law, there is no right of redemption under state law. If foreclosure occurs under state law, any rights or redemption under state law must be excepted.

Requirements

To insure a third-party purchaser at foreclosure or a purchaser after a HUD single family nonjudicial foreclosure under federal law, we require the following:

The Foreclosure (Quitclaim) Deed, Addendum to Deed, or a separate affidavit must recite the following:

1. The mortgage was held by HUD.
   
   
2. Notice of Default and Foreclosure Sale was sent by certified or registered mail at least 21 days before the sale to:
   
   - the current owner
   - the original mortgagor
   - all dwelling units on the land (if tenants unknown, the notice must be posted on the land)
   - all lienholders (whether subordinate or superior)
   
   You must determine that the owner and subordinate lienholders actually received notice. If you insure the purchaser at the foreclosure sale, review the return receipt. If you insure a later transaction, review the recitals.
   
   
3. Publication of Notice of Default and Foreclosure Sale was made once a week for three successive weeks before the sale in a newspaper of general circulation in the county.
   
   
4. The sale occurred at the date and time identified in the Notice of Default and Foreclosure Sale between 9 a.m. and 4 p.m. local time.
   
   
5. The name of the successful bidder and the amount of the bid.

Notice of Default and Foreclosure Sale must be filed in the local public records at least 21 days before the sale.

Except to or require a release of all superior liens.

Require a release of a subordinate lien (executed at any time before the sale) if the lienholder did not receive notice of the sale.

Require proof of the standard 25-day notice to the IRS to foreclose a subordinate federal tax lien. You must include an exception concerning the right of redemption of the U.S. for 120 days if the U.S. was properly notified.

If you issue to the purchaser at the foreclosure sale, verify that the foreclosure commissioner was a resident of the state. You may rely on written recitals or verbal confirmation.

If you issue to the purchaser at the foreclosure sale, require a copy of the appointment of the foreclosure commissioner by the HUD Field Assistant General Counsel.

Verify that no one is in possession of the land, except pursuant to a written lease with the purchaser at or after foreclosure. Do not insure if the mortgagor is in possession.

Do not insure if you know that HUD is suing the borrower for a deficiency judgment.

You may insure based on this foreclosure procedure even if the mortgage was executed before the date of the Act.

Please see NL000049 entitled, "HUD Nonjudicial Mortgage Foreclosure", for additional information.