www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

July 1, 1992
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
MORTGAGEE LETTER 92-21
    TO:  ALL APPROVED MORTGAGEES
    ATTENTION:  SINGLE FAMILY SERVICING MANAGERS
    SUBJECT: Additional Extension of Time to Initiate Foreclosure to
             Permit Compliance with Assignment Letter or State
             Notice Requirements After Release from Bankruptcy Stay
 
         Mortgagee Letter 91-33 authorized a 60-day extension of time
    to initiate foreclosure without HUD prior approval if initiation
    within one year of default was prohibited by bankruptcy action
    or local law.  The mortgagee letter also provided for a 60-day
    extension of time after an assignment request is rejected.  A
    60-day extension may not be adequate if the mortgagee must send the
    letters under the assignment program or send notices required by
    State law after the mortgage is released from bankruptcy stay.
 
         Effective with the date of this mortgagee letter, mortgagees
    are authorized an additional extension of time for foreclosure
    initiation without prior HUD approval to permit compliance with
    HUD's assignment and State law requirements.
 
         1.  HUD Requirements to Send Assignment Letters.  If the
             mortgagee is required by HUD Handbook 4330.1, REV-3,
             Paragraph 8-7A.1.a. to send the HUD assignment letters
             after the bankruptcy stay has been released, the mortgagee
             is herewith authorized a 90-day extension of time
             to initiate foreclosure (60-day extension as discussed
             in the first paragraph of this letter plus an additional
             30 days) in order to allow sufficient time for dispatch
             and response to the assignment letters.  The mortgagee
             must be very prompt in sending the assignment letters so
             that there will be sufficient time remaining to initiate
             foreclosure if appropriate.
 
         2.  State Law Requirement to Send a Demand Letter or Similar
             Notice.  If State law requires that a demand letter or
             similar notice be sent after bankruptcy stay has been
             released and before foreclosure is instituted, the
             mortgagee is authorized an additional extension of the
             minimum length of time for the notice (for example, if
             State law requires that a demand letter be sent not less
             than 30 but not more than 90 days before publication of
             sale, the additional extension will be 30 days).
 
_____________________________________________________________________
                                                               2
 
     3.  Combined Additional Extensions.  Additional extensions
         for both assignment letters and State law notices will
         not be permitted unless State law prohibits taking the
         two actions simultaneously.
 
     4.  Bankruptcy Stay Requirement.  The mortgagee is authorized
         an extension for compliance with an assignment or
         State law requirement in addition to a 60-day bankruptcy
         extension only if foreclosure could not be initiated
         within one year of default because of the bankruptcy
         action.  NOTE:  If processing of an assignment request
         prevents the mortgagee from initiating foreclosure
         within the one-year time frame, the local HUD Offices
         will continue to grant a 60-day extension on assignment
         rejections.
 
     5.  Beginning of Extension.  The extension of time begins
         when the court releases the bankruptcy stay or otherwise
         makes it possible to foreclose, not when the mortgagee
         learns of the court's action.  Mortgagees and their
         agents should monitor and follow-up on court proceedings
         where bankruptcies are delaying the initiation of
         foreclosure so required actions can be taken within the
         permitted time frame.
 
     6.  Application for Insurance Benefits.  In applying for
         mortgage insurance benefits where an additional 30-day
         extension is authorized by the mortgagee letter, the
         mortgagee should enter in Item 19 of Form HUD-27011 an
         expiration date which includes both the 60-day
         bankruptcy extension and the additional extension.  The
         reason for the additional 30-day extension must be given
         in the Mortgagee Comment section of Part A, Form
         HUD-27011.
 
     7.  Claim Review File.  Mortgagees must fully document the
         claim file to support the use of the additional 30-day
         extension.  This documentation may consist of dated
         copies of the court's release from the bankruptcy stay;
         dated copies of each HUD assignment letter sent before
         and after the bankruptcy; and dated copies of any demand
         letters or notices sent together with a reference to the
         applicable State law.  The documents will be examined as
         part of HUD's claim review to determine their accuracy
         and the appropriateness of the additional extension.
 
                         Very sincerely yours,
 
                         Arthur J. Hill
                         Assistant Secretary for Housing
                           - Federal Housing Commissioner
 
                    *U.S. Government Printing Office: 1992 - 312-218/60204