source:
  type: guide
  id: hud-4000-1-iv-m-lender-responsibilities-pending-insurance-claim-payment
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part IV — m. Lender
    Responsibilities Pending Insurance Claim Payment (05/09/2022)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part IV — m. Lender
    Responsibilities Pending Insurance Claim Payment (05/09/2022).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iv-m-lender-responsibilities-pending-insurance-claim-payment-full
  canonical_id: hud-4000-1-iv-m-lender-responsibilities-pending-insurance-claim-payment-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part IV — m. Lender Responsibilities
    Pending Insurance Claim Payment (05/09/2022)
  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 IV — m. Lender
      Responsibilities Pending Insurance Claim Payment (05/09/2022)
    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: 'm. Lender Responsibilities Pending Insurance Claim Payment (05/09/2022)
      If an insurance claim is pending payment, the Lender must not pursue active
      collections against the Borrower, but must take all steps necessary to protect
      the interests of HUD and the Lender. The Lender is responsible for keeping information
      current for a claim that has already been submitted, but not yet paid. i. Legal
      Notices The Lender is responsible for answering bankruptcy, foreclosure and
      other legal notices and forwarding the information to HUD. ii. Borrower Payments
      If a Borrower sends a payment while an insurance claim is pending, the Lender
      must accept it. The Lender then may either retain the payment and submit an
      amended form HUD-637, or hold the payment and forward it to the FOC after HUD
      pays the claim. If a Lender opts not to submit an amended form HUD-637, the
      Lender may contact the FOC to advise that a payment is being held and request
      that processing of the claim be expedited so that the payment can be forwarded
      to the FOC. iii. Release of Liability The Lender must not release the Borrower
      or any co-maker or Co-signer from liability under the Note unless in connection
      with an assumption, or unless approved in advance by HUD. The Lender may seek
      approval from HUD by sending a written request to the FOC. The Lender’s submission
      to the FOC must include: • information regarding the proposed release of liability;
      • explanation as to why the Borrower is seeking release from liability; • the
      Lender’s recommendation; and • documentation that supports why HUD should approve
      the request. IV. CLAIMS AND DISPOSITION C. Title I Claims 2. Title I Claims
      for Manufactured Homes Handbook 4000.1 1674 Last Revised: 11/26/2025 2. Title
      I Claims for Manufactured Homes Since HUD does not take the Property upon Default,
      the claim paid by HUD is based on the deficiency balance. HUD requires the Lender
      to sell the Property prior to submitting a claim and requires the claim payment
      to be based on the Best Price Obtainable. If the repossessed Property is not
      covered by hazard or flood insurance and is subsequently damaged, the Lender
      bears responsibility for the loss. The appraised value, for claim purposes,
      will be based on the retail value of comparable homes in undamaged condition,
      without any deduction for such damage.'
  judgment: false
