source:
  type: guide
  id: hud-4000-1-iii-p-foreclosure
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — p. Foreclosure
    (12/30/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — p. Foreclosure
    (12/30/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-p-foreclosure-full
  canonical_id: hud-4000-1-iii-p-foreclosure-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — p. Foreclosure
    (12/30/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — p. Foreclosure
      (12/30/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'p. Foreclosure (12/30/2025) When a Borrower with a Mortgage
      in Default cannot or will not resume and complete their Mortgage Payments, the
      Mortgagee must take steps to acquire the Property or see that it is acquired
      by a third party. Before starting foreclosure, the Mortgagee must review its
      servicing record to be certain that servicing has been performed in accordance
      with HUD guidance. When foreclosure is appropriate, Mortgagees must initiate
      and complete foreclosure in a timely manner. i. Mortgagee Action before Initiation
      of Foreclosure The Mortgagee must exercise reasonable diligence in collecting
      past due Mortgage Payments by: • utilizing Early Delinquency Servicing Workout
      tools; • determining eligibility of HUD’s Loss Mitigation Program when appropriate;
      • performing the first legal action to initiate foreclosure, to acquire title
      and possession of the Property, when necessary; • ensuring the Mortgage has
      been accurately reported to consumer reporting agencies in accordance with applicable
      federal law; and • ensuring any former Borrower, co-Borrower and/or co-signer
      personally liable for payment of the mortgage debt has been notified, as appropriate.
      (A) Assignments for Special Mortgages The Mortgagee must not foreclose on Mortgages
      insured pursuant to Sections 203(q), 247, and 248 of the National Housing Act.
      The Mortgagee must comply with HUD’s collection communication requirements and
      may assign the Mortgage to HUD as follows: • Section 203(q) Mortgages: may assign
      the Mortgage to HUD, after the Mortgage has been in Default for 90 Days. • Section
      247 Mortgages: may assign the Mortgage to HUD, after the Mortgage has been in
      Default for 180 Days. • Section 248 Mortgages: may assign the Mortgage to HUD,
      after the Mortgage has been in Default for 90 Days. (B) Time Frame for Utilization
      of Loss Mitigation or Initiation of Foreclosure The Mortgagee must utilize a
      Loss Mitigation Option or initiate foreclosure within six months of the date
      of Default. FHA considers the Mortgagee to have satisfied this requirement if,
      within the six-month time frame, the Mortgagee initiates the first legal action
      to begin foreclosure or the Borrower: III. SERVICING AND LOSS MITIGATION A.
      Title II Insured Housing Programs Forward Mortgages 2. Default Servicing Handbook
      4000.1 1285 Last Revised: 11/26/2025 • enters into or is performing as agreed
      on a Repayment Plan or Forbearance; • completes a refinance of an insured cooperative
      housing Mortgage; • has been approved for a Permanent Home Retention Option;
      • executes a PFS ATP; or • executes a DIL agreement. (C) When to Initiate Foreclosure
      After at least three consecutive full monthly Mortgage Payments are due but
      unpaid, a Mortgagee may initiate a foreclosure for monetary Default if one of
      the following conditions is met: • the Mortgagee has completed its review of
      the Borrower’s loss mitigation request, determined that the Borrower does not
      qualify for a Loss Mitigation Option, properly notified the Borrower of this
      decision, and rejected any available appeal by the Borrower; • the Borrower
      has failed to perform under a Loss Mitigation Option Agreement, and the Mortgagee
      has determined that the Borrower is ineligible for other Loss Mitigation Options;
      or • the Mortgagee has been unable to determine the Borrower’s eligibility for
      any Loss Mitigation Option due to the Borrower not responding to the Mortgagee’s
      efforts to contact the Borrower. (D) Exceptions to Foreclosure Initiation Time
      Frame (1) Standard A Mortgagee may initiate foreclosure on a Delinquent Mortgage
      if one of the following conditions is met: • the Mortgagee has determined that
      the mortgaged Property has been abandoned or has been vacant for more than 60
      Days and the Mortgagee was unable to determine the Borrower’s eligibility for
      any Loss Mitigation Option due to the Borrower not responding to the Mortgagee’s
      efforts to contact the Borrower; • the Borrower has notified the Mortgagee in
      writing that they have no intention of fulfilling their obligation under the
      Mortgage after being clearly advised of the Loss Mitigation Options available
      for relief, including PFS and DIL; • the mortgaged Property is not the Borrower’s
      Principal Residence and it is occupied by tenants who are paying rent, but the
      Rental Income is not being applied to the mortgage debt; or • the Property is
      owned by a corporation or partnership. (a) Vacant or Abandoned Properties If
      the Mortgage is in Default, the Mortgagee must commence foreclosure: • no later
      than six months after the date of Default; or III. SERVICING AND LOSS MITIGATION
      A. Title II Insured Housing Programs Forward Mortgages 2. Default Servicing
      Handbook 4000.1 1286 Last Revised: 11/26/2025 • no later than 120 Days after
      the latter of the date that: o the Property becomes vacant; o the Property is
      discovered or should have been discovered vacant or abandoned; or o for Properties
      that have two, three, or four units, all units are discovered or should have
      been discovered vacant or abandoned. If the Mortgagee fails to inspect the Property
      within the required time period, or fails to discover the vacancy, the vacancy
      date will be the last date on which the Mortgagee should have performed the
      inspection. If the Property becomes vacant prior to an inspection and the Mortgagee
      has knowledge of such vacancy, then the date the Property became vacant is the
      vacancy date. (b) Prohibition of Foreclosure due to State Legislation In some
      states, the Mortgagee must delay, cancel, and/or reschedule a foreclosure action
      to comply with state law requirements. HUD provides an automatic 90-Day extension
      after the expiration of the time during which foreclosure is prohibited to commence,
      where: • the foreclosure sale would have been conducted in the required time
      frame but was canceled to comply with state law; and • the initial legal action
      to commence foreclosure was timely. (c) Prohibition of Foreclosure due to Federal
      Law or Regulations Where a federal regulation requires a delay in the initiation
      of foreclosure, the Mortgagee must initiate foreclosure no later than 90 Days
      after the expiration of the time during which foreclosure is prohibited. The
      status of the Defaulted Mortgage should be reported in SFDMS using the established
      Delinquency/Default Reason (DDR) Code for federally mandated delay. (d) Prohibition
      of Foreclosure due to Bankruptcy If federal bankruptcy does not permit commencement
      of foreclosure within the standard six-month time frame, or requires foreclosure
      to be discontinued, the Mortgagee must commence or, if applicable, recommence
      foreclosure within 90 Days after the applicable release of stay or bankruptcy
      discharge date. (e) Prohibition of Foreclosure due to Servicemembers Civil Relief
      Act Mortgagees are allowed an automatic 90-Day extension from the date the applicable
      SCRA foreclosure moratorium expires. III. SERVICING AND LOSS MITIGATION A. Title
      II Insured Housing Programs Forward Mortgages 2. Default Servicing Handbook
      4000.1 1287 Last Revised: 11/26/2025 (f) Moratorium on Foreclosure due to Disaster
      Mortgages secured by Properties in Presidentially-Declared Major Disaster Areas
      (PDMDA) are subject to a 90-Day moratorium on the initiation of foreclosures
      and foreclosures already in process following the disaster. HUD provides the
      Mortgagee an automatic 90-Day extension from the date of the moratorium expiration
      date to commence or recommence foreclosure action or evaluate the Borrower under
      HUD’s Loss Mitigation for Borrowers in PDMDAs. (2) Automatic Extensions for
      Foreclosure Initiation Time Frame for Loss Mitigation Option HUD provides automatic
      90-Day extensions to the deadline to complete a Loss Mitigation Option or to
      perform the first legal action initiating foreclosure, provided the Mortgagee
      has: • evaluated and approved the Borrower for a Loss Mitigation Option prior
      to the expiration of the initial six-month period to initiate foreclosure, or
      issued an ATP in the PFS Program resulting in early termination or option failure;
      • reported the Loss Mitigation Option via SFDMS; and • initiated foreclosure
      action after reviewing the Borrower for other Loss Mitigation Options from the
      date the Borrower defaulted under a Loss Mitigation Option or a TPP Agreement
      failed. Mortgagees may use these automatic extensions as outlined in Automatic
      Extensions to HUD’s Initiation of Foreclosure Timeline. HUD does not provide
      automatic extensions for completion of a DIL; the Mortgagee must submit a request
      for extension of time for completion of a DIL to HUD for approval via EVARS.
      HUD does not provide automatic extensions for attempting an assumption. (3)
      Loss Mitigation Denial If the Permanent Home Retention Option or OWL is denied,
      the Mortgagee must evaluate the Borrower for a Home Disposition Option. If the
      Borrower is denied for a Home Disposition Option, the Mortgagee must commence,
      recommence, or resume foreclosure no later than 90 Days after denial of the
      Loss Mitigation Option. HUD provides an automatic 90-Day extension to the initiation
      of foreclosure timeline in any case in which the Mortgagee needs additional
      time to comply with the appeals process required by the CFPB Loss Mitigation
      regulations under RESPA (Regulation X) at 12 CFR § 1024.41. III. SERVICING AND
      LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 2. Default
      Servicing Handbook 4000.1 1288 Last Revised: 11/26/2025 The 90-Day extension
      begins on the date the Mortgagee denies loss mitigation and sends the Borrower
      the notice required under CFPB regulations. (4) Requests for Other or Additional
      Extensions to the Time Requirement to Utilize Loss Mitigation Option For additional
      time extensions, and for extensions of time for any other reason not listed
      above, the Mortgagee must request the extension via EVARS prior to the expiration
      of the existing time frame and provide: • the dates required notices were sent
      to the Borrower; • the date the Mortgagee received the Complete Loss Mitigation
      Request; • the date the Mortgagee approved or denied the Borrower for Loss Mitigation
      Options; and • a clear explanation of the Mortgagee’s need for an extension
      to this deadline. (5) Required Documentation The Mortgagee must retain documentation
      of form HUD-50012, Mortgagee’s Request for Extensions of Time, in the Servicing
      File and the Claim File and must ensure that all extensions of time to initiate
      foreclosure are reflected in its claim submission. For all extensions of time
      requests, the Mortgagee must: • note the reason for the extension and relevant
      dates that necessitated the extension and retain documentation supporting the
      reason and dates in the Servicing File and the Claim File; • report the applicable
      status codes in SFDMS; and • report on form HUD-27011, Part A: o the dates relating
      to the extension; o in block 19, the Expiration Date of the 90-Day extension
      being used; o in the “Mortgagee’s Comments” section, the extension being used
      and the reason(s) for the extension; and o in the “Mortgagee’s Comments” section,
      the statement, “I certify that the use of this extension is for the reason(s)
      stated above.” (E) Curtailment of Claims and Unreasonable Property Preservation
      and Protection Payments Mortgagees are responsible for curtailment of interest
      and exclusion of unreasonable Property P&P payments. For each curtailment time
      frame, the time frame begins on the earlier of the date the action should have
      been taken in accordance with HUD requirements or the actual date the action
      was taken. III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs
      Forward Mortgages 2. Default Servicing Handbook 4000.1 1289 Last Revised: 11/26/2025
      (F) Management Review Prior to the initiation of foreclosure, the Mortgagee
      must: • develop a form or checklist to document that they have reviewed the
      Mortgage for foreclosure. A supervisor higher than the person submitting the
      Mortgage for foreclosure must sign or electronically acknowledge that they have
      reviewed and approve the document evidencing the decision to foreclose; • ensure
      the Mortgage Holder approves of the Mortgagee''s decision to foreclose, or has
      the delegated authority to make such decisions; and • continue to service the
      Mortgage throughout foreclosure proceedings and to work with the Borrower to
      avoid foreclosure pursuant to the Loss Mitigation During the Foreclosure Process
      section requirements and program requirements related to changes in the Borrower’s
      financial circumstances. (G) Manufactured Housing Review Due to the title evidence
      requirements for Manufactured Housing, the Mortgagee must: • review each Property
      at the time of foreclosure referral to determine if the collateral for the FHA-insured
      Mortgage is a Manufactured Home; and • ensure that all the Title Evidence for
      Manufactured Housing requirements are met before conveying a Manufactured Home
      to HUD. (H) Property Assessed Clean Energy Obligation Review The Mortgagee must:
      • review each Property at the time of foreclosure referral to determine if the
      Property is encumbered with a PACE obligation; • confirm that any identified
      PACE obligation may only become subject to an enforceable claim (i.e., a lien)
      for delinquent, regularly scheduled PACE special assessment payments, and otherwise
      complies with the following eligibility and acceptability criteria for Properties
      with a PACE obligation: o FHA case number must have been assigned prior to January
      7, 2018; o under the laws of the state where the Property is located, the PACE
      obligation is collected and secured by the creditor in the same manner as special
      assessment taxes against the Property; o the Property may only become subject
      to an enforceable claim (i.e., lien) that is superior to the FHA-insured Mortgage
      for delinquent, regularly scheduled PACE special assessment payments. The Property
      shall not be subject to an enforceable claim (i.e., lien) superior to the FHA-insured
      Mortgage for the full outstanding PACE obligation at any time (i.e., through
      acceleration of the full obligation). However, a notice of the lien for the
      full PACE obligation may be recorded in the land records; o there are no terms
      or conditions that limit the transfer of the Property to a new homeowner. Legal
      restrictions on conveyance arising from a PACE III. SERVICING AND LOSS MITIGATION
      A. Title II Insured Housing Programs Forward Mortgages 2. Default Servicing
      Handbook 4000.1 1290 Last Revised: 11/26/2025 obligation that could require
      consent of a third party before the owner can convey the Real Property are prohibited,
      unless such provisions may be terminated at the option of, and with no cost
      to, the homeowner; o the existence of a PACE obligation on a Property is readily
      apparent to Mortgagees, Appraisers, Borrowers, and other parties to an FHA-insured
      Mortgage transaction in the public records and must show the obligation amount,
      the expiration date, and cause of the expiration of the assessment. In no case
      may Default accelerate the expiration date; and o in the event of a sale, including
      a foreclosure sale, of the Property with outstanding PACE financing, the obligation
      continues with the Property, causing the new homeowner to be responsible for
      the payments on the outstanding PACE amount; and • contact HUD for guidance
      if a noncompliant PACE obligation is identified. ii. Conduct of Foreclosure
      Proceedings When foreclosure is necessary, the Mortgagee must give timely notice
      to HUD via SFDMS and exercise reasonable diligence in processing and completing
      foreclosure proceedings to acquire good marketable title and possession of the
      Property. HUD expects Mortgagees to comply with all federal, state, and local
      laws when prosecuting a foreclosure and pursuing a possessory action. (A) Initiating
      Foreclosure (1) First Legal Action to Initiate Foreclosure The Mortgagee must
      perform the first legal action to initiate foreclosure for each state as provided
      in Appendix 6.0 – First Legal Actions to Initiate Foreclosure and Reasonable
      Diligence Time Frames. (2) Notice to HUD of Foreclosure Initiation The Mortgagee
      must give notice to HUD within 30 Days of initiating foreclosure by reporting
      the foreclosure status in the monthly SFDMS report. The Mortgagee must report
      the foreclosure status for the current cycle or following cycle in which the
      first required public legal action is taken to initiate foreclosure. (3) Notice
      to HOA or Condominium Associations As part of the foreclosure proceedings, the
      Mortgagee must notify and serve all Interested Parties of the pending foreclosure,
      pursuant to state law. Unless otherwise specified by state law, Interested Parties
      include all condominium management companies and HOAs that are reflected in
      the Mortgage/origination documents, recorded covenants/declarations, initial
      foreclosure referral and/or III. SERVICING AND LOSS MITIGATION A. Title II Insured
      Housing Programs Forward Mortgages 2. Default Servicing Handbook 4000.1 1291
      Last Revised: 11/26/2025 title search review, or made known to the Mortgagee
      during the foreclosure proceedings. (4) Outstanding HOA or Condominium Association
      Fees Unless prohibited by state law, the Mortgagee must ensure that outstanding
      HOA/Condominium Fees are included as part of the foreclosure proceeding. (B)
      Servicemembers Civil Relief Act Protection during Foreclosure The Mortgagee
      must obtain court permission before foreclosing on a Mortgage falling under
      provisions of the SCRA. A foreclosure sale or Manufactured Housing repossession
      during the period of military service and subsequent periods specified within
      the SCRA is invalid unless it is: • made pursuant to a court order granted before
      such sale with a return made and approved by the court; or • held pursuant to
      a written agreement, entered after the commencement of Active Duty, between
      the parties involved. (C) Loss Mitigation during the Foreclosure Process The
      Mortgagee may evaluate the Borrower for a Loss Mitigation Option during the
      foreclosure process where: • the Borrower submits their initial Complete Loss
      Mitigation Request; or • the Mortgagee has determined that the Borrower was
      ineligible for loss mitigation based on a Complete Loss Mitigation Request and
      a change in circumstances has occurred so that a Borrower may be eligible for
      a subsequent loss mitigation review. (1) Requests Received during Foreclosure
      The following describes Mortgagee action regarding foreclosure proceedings and
      loss mitigation requests, depending on when the request is received by the Mortgagee.
      (a) 45 or More Days to Scheduled Foreclosure Sale Date (i) Response When the
      loss mitigation request is received 45 Days or more prior to the scheduled foreclosure
      sale date, the Mortgagee must notify the Borrower in writing within five business
      days of receiving the request that: • the Borrower’s request has been received;
      and • the request is complete or incomplete. III. SERVICING AND LOSS MITIGATION
      A. Title II Insured Housing Programs Forward Mortgages 2. Default Servicing
      Handbook 4000.1 1292 Last Revised: 11/26/2025 (ii) Review Within 30 Days of
      receiving a Complete Loss Mitigation Request, the Mortgagee must: • review a
      Borrower’s request for eligibility for all Loss Mitigation Options; and • provide
      the Borrower with a notice in writing stating the Mortgagee’s determination
      of which Loss Mitigation Option, if any, it will offer to the Borrower. (iii)Foreclosure
      Action A Mortgagee must not move forward with a scheduled foreclosure sale during
      its loss mitigation review. (b) More than 37 Days but Less than 45 Days to Scheduled
      Foreclosure Sale Date (i) Review Within 30 Days of receiving a Complete Loss
      Mitigation Request, the Mortgagee must review a Borrower’s request for eligibility
      for Loss Mitigation Options when received more than 37 Days but less than 45
      Days to the scheduled foreclosure sale date. If an incomplete request is received
      and is not completed despite the Mortgagee’s repeated requests to the Borrower
      for information, the Mortgagee may, at its discretion, evaluate an incomplete
      loss mitigation request and offer a proprietary, non-incentivized Loss Mitigation
      Option. (ii) Foreclosure Action The Mortgagee must not move forward with a scheduled
      foreclosure sale during its loss mitigation review. (c) 37 or Fewer Days Prior
      to the Scheduled Foreclosure Sale Date (i) Review A Mortgagee must use its best
      efforts to complete a thorough and accurate review when the Borrower’s request
      is received 37 Days or fewer, prior to the scheduled foreclosure sale date.
      (ii) Foreclosure Action HUD does not require the Mortgagee to suspend the foreclosure
      sale. The Mortgagee may proceed with a foreclosure sale if the Mortgagee: III.
      SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
      2. Default Servicing Handbook 4000.1 1293 Last Revised: 11/26/2025 • determines
      after its review of available information that a Borrower is ineligible for
      loss mitigation; or • using its best efforts, is still unable to complete a
      thorough and accurate review of a Borrower’s request by the scheduled foreclosure
      sale date. (2) Terminating Foreclosure Proceedings for Loss Mitigation When
      a Borrower requests loss mitigation assistance for the first time during a Default
      episode after the Mortgagee has initiated foreclosure, the Mortgagee must suspend
      and/or terminate the foreclosure proceedings, depending on the state law requirement,
      after the Mortgagee has: • verified that a Borrower’s financial situation qualifies
      them for a Loss Mitigation Option; • allowed the Borrower at least 14 Days to
      consider the Mortgagee’s offer of loss mitigation assistance, if the request
      for loss mitigation was received more than 37 Days prior to the scheduled foreclosure
      sale date; and • received an executed Loss Mitigation Option Agreement, where
      applicable, or sales contract from the Borrower. If state law requires the Mortgagee
      to cancel a foreclosure action and then requires the Mortgagee to re-initiate
      the action at a later date, if needed, the Mortgagee must request HUD approval
      via EVARS for an extension of time to the first legal action deadline prior
      to approving the Borrower for loss mitigation. (3) Communication Between Departments
      The Mortgagee must ensure that strong communication lines are established between
      the Loss Mitigation and Foreclosure departments to facilitate the coordination
      of loss mitigation efforts and the sharing of documentation and information
      relating to a Borrower’s delinquency. Both departments must be aware of when
      a Borrower’s file is under review for HUD’s Loss Mitigation Program. (D) Borrower
      Sale of the Property before Foreclosure Sale HUD encourages the Mortgagee, when
      possible, to provide the Borrower with an opportunity to sell the Property and
      to provide a reasonable time to complete the sale. The Mortgagee should not
      initiate foreclosure if it appears that a sale is probable and should accept
      payments tendered while the Property is for sale and before foreclosure is started.
      III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward
      Mortgages 2. Default Servicing Handbook 4000.1 1294 Last Revised: 11/26/2025
      (E) Reasonable Diligence in Completing Foreclosure (1) Definition The Reasonable
      Diligence Time Frame is the time period beginning at the earlier of the date
      the first legal action should have been filed in accordance with HUD time frames
      or the date the actual first legal action required by the jurisdiction to commence
      foreclosure was taken, and ending with the later date of acquiring good marketable
      title to, and possession of, the Property. (2) Standard The Mortgagee must exercise
      reasonable diligence when processing foreclosures and acquiring title to and
      possession of Properties, in accordance with HUD’s Reasonable Diligence Time
      Frames. When circumstances beyond the Mortgagee’s control occur, the Mortgagee
      may treat delays in completing the foreclosure process as exceptions to the
      Reasonable Diligence Time Frames and may exclude such delays when calculating
      the time to complete a foreclosure if an extension has been granted by HUD.
      (a) Delay due to Use of Loss Mitigation Home Retention Option When determining
      compliance with the Reasonable Diligence Time Frame, the Mortgagee may exclude
      the time that the Borrower was performing under a Repayment Plan, Forbearance,
      or TPP. (b) Delay due to Foreclosure Mediation Where mediation is required after
      the initiation of foreclosure but before the foreclosure sale, the Mortgagee
      may exclude the time required to complete the mediation when determining compliance
      with the Reasonable Diligence Time Frame. (c) Delay due to Active Duty Military
      Service If a Borrower is on Active Duty military service and the Mortgage was
      obtained prior to entry into Active Duty military service, the Mortgagee may
      exclude the period during which the Borrower is on Active Duty military service
      when computing the Reasonable Diligence Time Frame. (d) Delay due to Bankruptcy
      When a Borrower files bankruptcy after foreclosure proceedings have been initiated,
      an automatic 90-Day extension for foreclosure and acquisition of the Property
      will be allowed if: III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing
      Programs Forward Mortgages 2. Default Servicing Handbook 4000.1 1295 Last Revised:
      11/26/2025 • the Mortgagee ensures that all necessary bankruptcy-related legal
      actions are handled in a timely and effective manner; • the case is promptly
      referred to a bankruptcy attorney after the bankruptcy is filed; and • the Mortgagee
      monitors the action to ensure that the case is timely resolved through dismissal,
      termination of the automatic stay, or trustee abandonment of all interest in
      the secured Property. The time frame for completing the bankruptcy action will
      vary based on the chapter under which the bankruptcy is filed. (i) Chapter 7
      Bankruptcy HUD allows the Mortgagee an additional 90 Days from the date of the
      release of stay of the Chapter 7 bankruptcy to commence or recommence the foreclosure.
      (ii) Chapter 11, 12, or 13 Bankruptcy When the Mortgagee cannot proceed with
      foreclosure action because of a Chapter 13 (or Chapter 11 or 12) bankruptcy,
      the Mortgagee must closely monitor the payments required by the bankruptcy court.
      If the Borrower becomes 60 Days delinquent in payments required under a Chapter
      13 (or Chapter 11 or 12) plan, the Mortgagee must ensure that prompt legal action
      is taken to resolve the matter. Any delay the Mortgagee encounters must be fully
      documented and must be beyond the Mortgagee’s control. (e) Delay in Acquiring
      Possession When a separate legal action is necessary to gain possession following
      foreclosure, an automatic extension of the Reasonable Diligence Time Frame will
      be allowed to cover the actual time necessary to complete the possessory action.
      HUD provides this automatic extension if the Mortgagee takes the first required
      public legal action to initiate the eviction or possessory action within 30
      Days of the later of: • the completion of foreclosure proceedings; or • the
      expiration of federal or local restrictions on eviction. The additional time
      needed under applicable federal, state, or local laws to obtain possession of
      a Property is taken into consideration when evaluating a Mortgagee’s compliance
      with HUD’s Reasonable Diligence Time Frame. Upon the expiration period associated
      with the applicable occupancy rights, Mortgagees are expected to proceed promptly
      with possessory actions. III. SERVICING AND LOSS MITIGATION A. Title II Insured
      Housing Programs Forward Mortgages 2. Default Servicing Handbook 4000.1 1296
      Last Revised: 11/26/2025 (3) Required Documentation The Mortgagee must document
      in the Servicing File and the Claim File any delay in completing foreclosure
      and all activities performed by the Mortgagee to mitigate and abide by these
      time frames. The Mortgagee must maintain a comprehensive audit trail and chronology
      to support any delay in compliance with the Reasonable Diligence Time Frames.
      Where the Mortgagee has submitted a request for an extension of time to HUD
      via EVARS, the Mortgagee must maintain a copy of HUD’s written response in the
      Servicing File and the Claim File. The request should be made as soon as possible,
      but before the time limit for that action expires. For automatic extensions,
      the Mortgagee must reflect these extensions in form HUD-27011 and retain in
      the Servicing File and the Claim File documentation supporting those extensions.
      (F) Allowable Foreclosure Attorney Fees and Fees Associated with Bankruptcy
      Clearance, Possessory Actions, and Completion of a DIL (1) Definition The Fannie
      Mae Allowable Foreclosure Attorney Fees Exhibit provides the maximum amount
      of foreclosure attorney fees that HUD will reimburse for work actually performed.
      The Fannie Mae Allowable Bankruptcy Attorney Fees Exhibit provides the maximum
      amount of bankruptcy attorney fees that HUD will reimburse for work actually
      performed. Appendix 5.0 – HUD Schedule of Standard Possessory Action and Deed-In-Lieu
      of Foreclosure Attorney Fees (Applies to Servicing Only) provides the maximum
      amount of fees that HUD will reimburse for work actually performed related to
      possessory actions and the completion of a DIL. (2) Standard HUD will reimburse
      Mortgagees for reasonable and customary fees for work actually performed related
      to the current Default episode that were paid to attorneys and trustees in connection
      with the foreclosure of a Mortgage, fees associated with bankruptcy clearance,
      possessory actions and/or completion of a DIL. For additional expenses incurred
      due to required legal actions, the Mortgagee may claim reimbursement for these
      costs by: III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs
      Forward Mortgages 2. Default Servicing Handbook 4000.1 1297 Last Revised: 11/26/2025
      • providing a documented cost breakdown and written justification with the claim
      submission and retaining a copy in the Claim File; and • filing a supplemental
      claim for amounts above the maximum fee. If a Mortgagee suspends or cancels
      a foreclosure action to perform loss mitigation, or if the Mortgage is reinstated
      or paid in full, the Mortgagee may only charge the Borrower for attorney fees
      incurred for the work performed up to the point of the cessation. (a) Allowable
      Foreclosure Attorney Fees Mortgagees may claim reimbursement from HUD for attorney
      fees related to routine foreclosure actions for the preferred method of foreclosure
      based on the Fannie Mae Allowable Foreclosure Attorney Fees Exhibit in the Fannie
      Mae Servicing Guide Exhibits & Resources. The amount claimed for attorney fees
      cannot exceed the actual fees charged for work performed. Mortgagees may not
      request HUD approval to proceed with a method of foreclosure in states where
      an amount is not specified on the Fannie Mae Allowable Foreclosure Attorney
      Fees Exhibit. The footnotes included are not applicable to FHA-insured Mortgages.
      Fannie Mae revises this Exhibit frequently, so Mortgagees must ensure the fees
      claimed for reimbursement are based on the Exhibit in effect as of the date
      foreclosure is initiated. HUD reserves the right to revise amounts which it
      considers reasonable and customary at any time. Mortgagees may claim no more
      than 75 percent of the maximum attorney fee for fees incurred for a routine
      foreclosure that was not completed because any of the following occurred after
      the Mortgagee initiated foreclosure: • the Borrower filed a bankruptcy petition;
      • the Borrower successfully completed a Home Retention Option; • the Borrower
      successfully completed a PFS; or • the Borrower executed a DIL. (b) Allowable
      Bankruptcy Attorney Fees Mortgagees may claim reimbursement from HUD for routine
      bankruptcy clearance actions based on the Fannie Mae Allowable Bankruptcy Attorney
      Fees Exhibit in the Fannie Mae Servicing Guide Exhibits & Resources. The amount
      claimed cannot exceed the actual fees charged for work performed. Fannie Mae
      revises this Exhibit frequently, so Mortgagees must ensure the fees claimed
      for reimbursement are based on the Exhibit in effect as of the date the Borrower’s
      bankruptcy is filed. HUD reserves the right to revise amounts which it considers
      reasonable and customary at any time. III. SERVICING AND LOSS MITIGATION A.
      Title II Insured Housing Programs Forward Mortgages 2. Default Servicing Handbook
      4000.1 1298 Last Revised: 11/26/2025 (c) Fees Associated with Possessory Actions
      or Completion of a DIL Mortgagees may claim reimbursement from HUD for the fees
      associated with possessory action and completion of a DIL as listed in Appendix
      5 – HUD Schedule of Standard Possessory Action and Deed-In-Lieu of Foreclosure
      Attorney Fees. The amount claimed cannot exceed the actual fees charged for
      work performed. (3) Required Documentation Mortgagees are expected to maintain
      documentation in the Servicing File and the Claim File to support all allowable
      fees. (G) Electronic Record Retention of Foreclosure-Related Documents The Mortgagee
      must retain documents relating to loss mitigation review in electronic format,
      in addition to requirements for retaining hard copies or originals of foreclosure-related
      documents, for foreclosures occurring on or after October 1, 2014. These documents
      include, but are not limited to: • evidence of the Mortgagee’s foreclosure committee
      recommendation; • the Mortgagee’s Referral Notice to a foreclosure attorney,
      if applicable; and • a copy of the document evidencing the first legal action
      necessary to initiate foreclosure and all supporting documentation. iii. Claims
      Without Conveyance of Title (07/12/2022) (A) Definitions A Claims Without Conveyance
      of Title (CWCOT) is a procedure under which the Mortgagee attempts to secure
      a third-party purchaser for the mortgaged Property so that conveyance to HUD
      is not required in exchange for mortgage insurance benefits. A Competitive Sale
      is a CWCOT-related sale where a Mortgagee elects to use an independent third-party
      provider to conduct the foreclosure sale or in connection with any post-foreclosure
      sales efforts and where the Property is marketed for a minimum of 15 Days. A
      Non-Competitive Sale is a CWCOT-related sale where a Mortgagee elects not to
      use an independent third-party provider to conduct the foreclosure sale or in
      connection with any post-foreclosure sales efforts and/or the Property is not
      marketed for a minimum of 15 Days. III. SERVICING AND LOSS MITIGATION A. Title
      II Insured Housing Programs Forward Mortgages 2. Default Servicing Handbook
      4000.1 1299 Last Revised: 11/26/2025 (B) Qualification Criteria for Use of Commissioner’s
      Adjusted Fair Market Value (1) Definition The Commissioner’s Adjusted Fair Market
      Value (CAFMV) is the estimate of the FMV of the mortgaged Property, less adjustments,
      which may include without limitation, HUD’s estimate of holding costs and resale
      costs that would be incurred if title to the mortgaged Property were conveyed
      to HUD. (2) Standard Mortgagees must use the CAFMV for all foreclosure sales
      and post-foreclosure sales efforts associated with defaulted FHA-insured Mortgages
      when eligible for CWCOT. A Mortgage is eligible for CWCOT when all the following
      criteria are met: • the FHA-insured mortgage insurance is still active for the
      FHA case number; • the Mortgagee has worked with the Borrower to exhaust all
      applicable Home Retention Options and has determined that the Borrower’s case
      does not meet the criteria for a Home Disposition Option, or the Mortgagee has
      been unable to locate the Borrower and the Property is vacant or has been abandoned
      by the Borrower; and • the Property has no Surchargeable Damage. (3) Small Servicer
      Exemption (a) Definition Small Servicers are those Servicers defined in 12 CFR
      § 1026.41(e)(4)(ii). (b) Standard HUD permits but does not require the use of
      CAFMV by small servicers. (C) Property Valuation and Commissioner’s Adjusted
      Fair Market Value (1) Required Appraisal Unless otherwise directed by HUD, Mortgagees
      must first obtain, and review for accuracy, an “As-Is” FHA appraisal, which
      includes both an interior and exterior evaluation of the Property. The FHA appraisal
      must be completed in accordance with the Claims Without Conveyance of Title
      Properties requirements in the Appraiser and Property Requirements for Title
      II Forward and Reverse Mortgages section. III. SERVICING AND LOSS MITIGATION
      A. Title II Insured Housing Programs Forward Mortgages 2. Default Servicing
      Handbook 4000.1 1300 Last Revised: 11/26/2025 If the Property is occupied and
      an interior appraisal cannot be obtained, an “exterior-only” appraisal may be
      used. (a) Appraisal Validity Period The appraisal must be valid on the date
      of the foreclosure sale. Appraisals are valid for 180 Days from the effective
      date of the appraisal report. (b) Extension to Appraisal Validity Period HUD
      provides an automatic 30-Day extension from the appraisal expiration date for
      delays due to bankruptcy, court delays, or delays outside of the Mortgagee’s
      control. The Mortgagee must request and obtain HUD approval via EVARS for extensions
      beyond the automatic 30-Day extension. (c) Subsequent Appraisals for Post-Foreclosure
      Sales Efforts If a Property that had an exterior-only appraisal becomes vacant,
      the Mortgagee must obtain a new appraisal that includes both an interior and
      exterior inspection if: • before foreclosure, any delay due to obtaining a new
      appraisal will not cause the foreclosure sale to be canceled; or • after foreclosure,
      the Mortgagee conducts post-foreclosure sales efforts. Mortgagees must use an
      FHA Roster Appraiser to conduct the new appraisal. HUD will reimburse the Mortgagee
      for the cost of one new appraisal following vacancy through the FHA insurance
      claim. (d) Required Documentation Mortgagees must upload the appraisal information
      and related FHA case number through HUD’s system of record (P260) within 30
      Days of the date of the appraisal. (2) Determining the CAFMV After determining
      the Property’s appraised value using the most recent appraisal, the Mortgagee’s
      authorized employees must access the CAFMV link in FHAC to determine a Property’s
      CAFMV. The CAFMV remains valid and in effect for 120 Days from the date of the
      appraisal. In jurisdictions where the Mortgagee is required to bid a specific
      amount at foreclosure, that amount will be deemed to be the CAFMV for purposes
      of the initial foreclosure; however, the Mortgagee’s authorized employees must
      access III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs
      Forward Mortgages 2. Default Servicing Handbook 4000.1 1301 Last Revised: 11/26/2025
      the CAFMV link in FHAC to determine a Property’s CAFMV for use in any post-
      foreclosure sales efforts. To facilitate a CWCOT post-foreclosure sales effort,
      the Mortgagee may contribute an additional amount needed to raise a third party’s
      bid to the CAFMV and allow the sale of the Property to such third party. HUD
      will not reimburse any contribution by the Mortgagee to facilitate the sale
      through the FHA insurance claim. (3) Damage to the Property after Appraisal
      The Mortgagee must request a variance from HUD via EVARS to proceed with the
      current appraised value if the Mortgagee becomes aware that the Property sustained
      significant damage, other than damage resulting from Borrower neglect, that
      may impact the value after the appraisal was completed. If HUD denies this request,
      additional instructions will be provided with the denial. (4) Updated Appraisals
      due to Postponed Foreclosure Sales If the foreclosure sale does not take place
      within 180 Days from the effective date of the appraisal, and within such additional
      time provided under Extension to Appraisal Validity Period, the Mortgagee must
      request an updated appraisal and obtain an updated CAFMV. (D) Independent Third-Party
      Providers (1) Definition An Independent Third-Party Provider is a party that
      conducts the foreclosure sale or post-foreclosure sales efforts, including marketing
      efforts in support of such sales under CWCOT procedures, and who is not one
      of the following: • an Affiliate or subsidiary of the Mortgagee; • any entity
      over which the Mortgagee has significant influence; or • any entity with which
      the Mortgagee has a conflict of interest in fact or appearance. (2) Standard
      Where permitted by the jurisdiction, the Mortgagee may utilize an independent
      third-party provider to market the Property prior to any foreclosure or post-
      foreclosure sales efforts or to conduct such sales to ensure maximum competition
      for both the foreclosure sale and post-foreclosure sales. The Mortgagee may
      only use an independent third-party provider that agrees, in writing, to share
      sales and auction reporting information with the Mortgagee and HUD. III. SERVICING
      AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 2.
      Default Servicing Handbook 4000.1 1302 Last Revised: 11/26/2025 For successful
      third-party sales, HUD will reimburse expenses relating to the Mortgagee’s use
      of an independent third-party provider to market or conduct the foreclosure
      sale or post-foreclosure sales efforts, provided the Property was marketed for
      a minimum of 15 Days before each scheduled sale. HUD will reimburse such independent
      third-party provider expenses incurred for successful third-party sales up to
      an amount that does not exceed: • 3 percent of the Property’s sales price where
      the independent third-party provider markets the Property, but does not conduct
      the sale; or • 5 percent of the Property’s sales price where the independent
      third-party provider markets the Property and conducts the sale. Closing costs
      of the sale are to be paid by the third-party purchaser or the Mortgagee. Revenue
      sharing agreements of the reimbursed fee between the Mortgagee and the independent
      third-party provider are prohibited. (E) CWCOT Bidding at the Foreclosure Sale
      The CAFMV is multi-tiered: • at the foreclosure sale, the Mortgagee must bid
      the CAFMV which is the FHA calculation or the state-mandated foreclosure price,
      if applicable; and • at post-foreclosure sales opportunities, the CAFMV is the
      FHA calculation, which may be adjusted if the Property had an exterior-only
      appraisal and is vacant after the foreclosure sale. (1) Mortgagee as Successful
      Bidder (a) Amount Equal to the CAFMV If the Mortgagee is the successful bidder
      for an amount equal to the CAFMV, the Mortgagee may elect to either: • retain
      title to the Property and file a claim for insurance benefits under CWCOT; or
      • convey the title to the Property to HUD and its claim for insurance benefits
      as a conveyance claim. (b) Amount Greater than CAFMV Where the Mortgagee’s bid
      exceeds the CAFMV, resulting in the Mortgagee acquiring title to the Property
      at a foreclosure sale, unless the sheriff or other appropriate local authority
      has mandated the subject bid as the minimum bid that could be set for the Property,
      the Mortgagee is deemed to have elected to retain title of the Property and
      the Mortgagee’s FHA claim for insurance benefits will be calculated in accordance
      with 24 CFR § 203.401(b). The Mortgagee may not utilize post-foreclosure sales
      efforts and may not convey title to the Property to HUD. III. SERVICING AND
      LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 2. Default
      Servicing Handbook 4000.1 1303 Last Revised: 11/26/2025 (2) Third Party as Successful
      Bidder (a) Amount Equal to or Greater than CAFMV Where a third party is the
      successful bidder at the foreclosure sale for an amount equal to or greater
      than the CAFMV, the Mortgagee must submit its claim for insurance benefits under
      CWCOT. (b) Amount Less than CAFMV Where a third party is the successful bidder
      at the foreclosure sale for an amount less than the CAFMV, the Mortgagee may
      not file a claim for any insurance benefits. (3) Borrower or Third Party Redemption
      Notwithstanding the foreclosure sale, the Borrower or a third party may exercise
      a legal right and redeem the Property. Where the Borrower or a third party redeems
      the Property and acquires title for an amount not less than the CAFMV, the Mortgagee
      must submit its claim for insurance benefits under CWCOT. (F) CWCOT Post-Foreclosure
      Sales Efforts If the Property does not sell to a third party at the foreclosure
      sale, the Mortgagee may pursue post-foreclosure sales efforts and may utilize
      independent third-party providers to conduct such sales prior to making a final
      decision to convey a Property to HUD. The Mortgagee’s third-party provider must
      indicate that the Property is being sold in an “as is” condition, and the condition
      is unknown and may include defects, possible health or safety hazards, or debris,
      or located in a Special Flood Hazard Area (SFHA). Where the Property is occupied,
      based on the appraisal or property inspection, the Mortgagee’s third-party provider
      must clearly indicate that the Property is occupied in the auction information.
      (1) CWCOT Post-Foreclosure Sales Period Mortgagees that utilize the post-foreclosure
      sales efforts must list the Property for sale to all third parties for a 60-Day
      period. (2) Extensions of Time Frames to Engage in Post-Foreclosure Sales Efforts
      HUD will provide the Mortgagee with an automatic extension of the conveyance
      time frames to attempt post-foreclosure sales efforts and commence possessory
      III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward
      Mortgages 2. Default Servicing Handbook 4000.1 1304 Last Revised: 11/26/2025
      action, where applicable, for 60 Days from the date the foreclosure deed is
      filed for recording or the expiration of the redemption period, if applicable,
      in circumstances where the Mortgagee complied with all foreclosure time frames.
      (a) Conveyance Time Frame if Property Does Not Sell If the Property does not
      sell through the post-foreclosure sales efforts, the Mortgagee must convey the
      Property to HUD within 30 Days of the end of the post-foreclosure sales period.
      (b) Extension of Conveyance Time Frame to Allow for Closing Where a sales contract
      has been ratified before the expiration of the 60-Day period, HUD will provide
      the Mortgagee with an additional, automatic 60- Day extension to the deadline
      for conveyance, from the date the sales contract has been ratified, to allow
      for closing of the sale. (3) Preservation and Protection during Post-Foreclosure
      Sales Periods The Mortgagee must preserve and protect the Property in accordance
      with HUD requirements during the post-foreclosure sales period and throughout
      any approved extensions to deadlines for conveyance. HUD will reimburse the
      Mortgagee through the FHA insurance claim for all reasonable preservation, protection,
      and eviction expenses incurred prior to the expiration of any extension of the
      deadlines for conveyance, as listed in Property Preservation Allowances.'
  judgment: false
