FHA Post Foreclosure Claims February 16, 2006 Phoenix, AZ Moderator: Bob Lyons Panelists:

1. Jodi Gaines, Vice President, Claims Recovery Financial Services LLC Leslie Bromer, U.S. Department of Housing and Urban Development Sarah Martin, U.S. Department of Housing and Urban Development Ann Thorn, Vice President, Washington Mutual Joseph Morrison, Vice President, M&T Bank Michelle Stockdale, Assistant Vice President, ABN AMRO FHA Post Foreclosure ClaimsFebruary 16, 2006 Phoenix, AZModerator: Bob Lyons Panelists:

2. Rolling Defaults • Although subsequent payments may be sufficient to advance the date of default when applied to overdue monthly payments, if the time requirement to initiate foreclosure or record a deed-in-lieu has been missed the application of such payments will not change the mortgagee’s failure to comply with the time requirement unless the payments are sufficient to cure the default. • When a loan is in default, and more than six months have elapsed before foreclosure is initiated with no intervening circumstances such a bankruptcy, a qualifying loss mitigation action or an approved HUD extension of time, the time requirement to initiate foreclosure is considered to have been missed regardless if subsequent payment advance the default date. Block 31 must be completed with the date the foreclosure should have been instituted.

3. Loss Mitigation • All FHA Mortgages in default must be evaluated to determine the most appropriate Loss Mitigation Option. • If an approved Loss Mitigation goes into Default, the servicer may be entitled to an extension to initiate foreclosure. The expiration of this extension will need to be entered in block 19 on the HUD Form 27011 Part A. The Servicer may also be entitled to additional note rate interest which is to be claimed on the Part B. • Loss Mitigation Options for Victims of Hurricane Katrina and Rita (and other disasters) can be found in the most recent Mortgagee Letters 2005-46, 2005-41, 2005-33 and 2005-31. • Tier One Incentives

4. Reasonable Diligence – Two Deed Process • Where possession is an issue, lender’s must request that the foreclosure deed be issued in the lender’s name so that any required eviction action can be taken in the lender’s name. In a two deed state, the reasonable diligence timeframe is measured from the first legal action to the date the foreclosure deed records. An allowance for the time the foreclosure was delayed due to delays beyond the mortgagee’s control such as court, sheriff or bankruptcy delays are added to the allowable timeframe without obtaining an extension from HUD.

5. Reasonable Diligence – Two Deed Process (cont’d) • Supporting documentation must be available in the post claim review file to be considered. The eviction must be commenced within 30 days of the foreclosure sale deed recording or expiration of redemption, confirmation or ratification (whichever is later and applicable).

6. Reasonable Diligence – Direct Deed to HUD • Where possession in not an issue (the property was abandoned or HUD granted permission to convey occupied), the timeframe is measured from the first legal action to the date that title to HUD is filed for record (and the HUD-27011, Part A is filed). The total time allowed to complete foreclosure will include the state reasonable diligence time allowance and an additional 30 days. There is no regulatory provision to add any time for an eviction.

7. Conveying Damaged Properties • A lender cannot convey a damaged property without prior HUD approval if the property was damaged due to: Fire, Flood, Earthquake, Hurricane, Tornado, Boiler Explosion or Mortgagee Neglect. • The burden of proof is on the servicer to prove there is no mortgagee neglect.

8. Conveying Damaged Properties(cont’d) • Where mold is the result of a mortgagee’s failure to preserve and protect such as evidence of roof or plumbing leaks, it will be the mortgagee’s responsibility. The source of the water infiltration will be the key. For cases where the file documentation supports that all inspections were conducted thoroughly and timely including proof of interior inspections including photos and any other documentation, the mortgagee would not be held responsible for resolving the mold. This is would not considered mortgagee neglect. • Remember, a lender’s delay in conducting a required inspection will also hold the lender as responsible as it will be for a failure to address a water leak, roof damage or other items that allowed water infiltration resulting in mold. All such actions would be considered mortgagee neglect and the lender would be responsible for resolving.

9. Reconveyances • In order to avoid a Reconveyance, the mortgagee must make every effort to convey a property in conveyance condition per HUD Guidelines. • In addition, the mortgagee should be conveying clear and marketable title to the property. HUD will no longer accept property if the mobile home title issues have not been resolved.

10. Reconveyances (cont’d) • Timeframes is which a property may be reconveyed to the servicer will all depend on the reason for the reconveyance. Damaged Property vs. Title Issues. • If the M&M has a potential purchaser prior to the title package being submitted and it’s determined title is not clear, the M&M may submit an intent to reconvey. • Once the servicer has addressed all reconveyance issues and submits a request (with required documentation) to the M&M to inspect the home, verify title is acceptable etc. The M&M should respond in a timely manner. If not, these matters need to be escalated. • Properties (mobile homes) are being sold prior to submission of title and HUD will not generate a TAL to file the final Part B. These items need to be escalated.

11. Reconveyances Accepted into Inventory • Once the mortgagee clears title, completes necessary repairs and determines the property is ready to be conveyed back to HUD, the mortgagee must prepare and submit a reconvey package to the Local M&M requesting permission to convey again. A copy of the M&M approval must be included with the paper reconveyance claim, 27011 Part A, sent to the Claims Branch, ATTN: Nettie James. Write “RECONVEYANCE” on the reconveyance claim package. The claim will be reviewed manually and, if it passes all the edits, the claim proceeds will be disbursed via Treasury’s ACH process.

12. Mortgagee Letter 2005-30Effective September 1, 2005 • Reasonable Diligence time frames • New Fee Schedule • New Bankruptcy Guidelines: The time frame for completing the legal action on a bankruptcy will vary based on the chapter under which the bankruptcy is filed.

13. Top 10 FHA Claim Mistakes • Based on FHA Post Claim Reviews conducted and closed in FY 2005 …....

14. Top 10 FHA Claim Mistakes • 10. Claiming expenses incurred after conveyance date • 9. Missing receipts or improper supporting documentation • 8. Claiming inappropriate attorney overhead expenses. • 7. Missed time requirements on Part A

15. Top 10 FHA Claim Mistakes • 6. Untimely SFDMS reporting –status 68 • 5. Not including HIP/ insurance premium refunds due to HUD • 4. Excessive Part B debenture interest • 3. Unsupported or inappropriate insurance benefits. • 2. P&P discrepancies

16. The Most Common Findingon FHA Post Claim Reviews 1. Compliance Discrepancies

17. Thank You! • Time for Questions!