source:
  type: guide
  id: hud-4000-1-iv-c-cancellation-of-insurance-benefits-due-to-reconveyance
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Cancellation
    of Insurance Benefits due to Reconveyance (03/01/2023)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Cancellation
    of Insurance Benefits due to Reconveyance (03/01/2023).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iv-c-cancellation-of-insurance-benefits-due-to-reconveyance-full
  canonical_id: hud-4000-1-iv-c-cancellation-of-insurance-benefits-due-to-reconveyance-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Cancellation
    of Insurance Benefits due to Reconveyance (03/01/2023)
  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 — c. Cancellation
      of Insurance Benefits due to Reconveyance (03/01/2023)
    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: 'c. Cancellation of Insurance Benefits due to Reconveyance (03/01/2023)
      i. Reconveyance (A) Definition A Reconveyance is a conveyance of a Property
      from HUD back to the Mortgagee due to the Mortgagee’s failure to comply with
      HUD’s conveyance requirements or at the Mortgagee’s request. (B) Standard When
      HUD reconveys a Property, the Mortgagee must return all insurance funds received
      from the claim associated with that Property. For Mortgages insured on or after
      November 19, 1992, the Mortgagee must also reimburse HUD for its holding costs
      and expenses incurred in the acquisition and Reconveyance of the Property. IV.
      CLAIMS AND DISPOSITION A. Title II Claims 4. Withdrawal or Cancellation of Conveyance
      Claims Handbook 4000.1 1622 Last Revised: 11/26/2025 (C) Reduction of Insurance
      Benefits due to Changes in Value For Mortgages insured on or after November
      19, 1992, if there is a reduction in the estimate of value from the time of
      Reconveyance to the time of reapplication for insurance benefits, HUD will deduct
      from the claim amount the difference in value. (D) FHA Short Refinance For Mortgages
      under the FHA Short Refinance program, the Mortgagee will be required to repay
      all claim funds to FHA, including the claim funds paid under the Emergency Economic
      Stabilization Act (EESA), in the event the Property is reconveyed to the Mortgagee.
      (E) Costs Relating to Title Defects (1) Insured on or after November 19, 1992
      For Mortgages insured under a Firm Commitment issued on or after November 19,
      1992, or under Direct Endorsement processing where the credit worksheet was
      signed by the Mortgagee’s approved underwriter on or after November 19, 1992,
      HUD may require the Mortgagee to correct title defects within 60 Days after
      the Mortgagee receives notice from the Secretary or within such further time
      as the Secretary may approve in writing. The Mortgagee may retain the insurance
      benefits already paid, but HUD will not reimburse the Mortgagee for any costs
      involved in correcting the title. (2) Insured before November 19, 1992 For Mortgages
      insured under a Firm Commitment issued before November 19, 1992, or under Direct
      Endorsement processing where the credit worksheet was signed by the Mortgagee’s
      approved underwriter before November 19, 1992, HUD may require the Mortgagee
      to correct title defects within such time as the Secretary may approve in writing.
      Where HUD allows the Mortgagee time to correct title defects, the Mortgagee
      may retain the insurance benefits already paid, but HUD will not reimburse the
      Mortgagee for any costs involved in correcting the title. (3) Reimbursement
      to HUD for Holding Costs and Interest If a title defect is not corrected within
      HUD’s time frame, the Mortgagee must reimburse HUD for holding costs and interest
      on the paid insurance benefits from the date of the notice to the date the defect
      is corrected or to the date the Secretary reconveys the Property, within the
      time frame stated by HUD in its Demand Letter. IV. CLAIMS AND DISPOSITION A.
      Title II Claims 4. Withdrawal or Cancellation of Conveyance Claims Handbook
      4000.1 1623 Last Revised: 11/26/2025 (4) Costs Associated with Correcting Title
      The Mortgagee is responsible for the costs in correcting title defects and for
      property expenses pending correction, except where HUD has sold the Property
      or Mortgage with an adverse interest senior to the Mortgage and causing the
      title defect. (5) Improper Deed to HUD If the Property was improperly deeded
      to HUD and the Property has been sold, HUD will remit to the Mortgagee the sales
      price less expenses of the sale and expenses incurred while the Property was
      in HUD’s inventory. (F) Property Preservation Costs (1) Standard The Mortgagee
      is responsible for any damages the Property has sustained while in the Mortgagee’s
      possession, if the Property was conveyed without prior notice and approval by
      HUD. If a Property is reconveyed because of damage, the Mortgagee must withdraw
      its claim for insurance benefits and reimburse HUD for property expenditures.
      (2) Holding Costs (a) Definition Holding Costs are those costs paid by HUD related
      to taxes, maintenance and operating expenses of the Property, and administrative
      expenses. (b) Standard If HUD finds that the Mortgagee did not comply with its
      conveyance standards, the Mortgagee must reimburse HUD for holding costs and
      interest on the paid insurance benefits from the date of the notice to the date
      the defect is corrected or to the date the Secretary reconveys the Property,
      as determined by HUD. (G) Appeals of Reconveyances due to Property Condition
      HUD has established a two-stage appeal procedure for disputes between Mortgagees
      and HUD regarding Reconveyance requests due to property condition. IV. CLAIMS
      AND DISPOSITION A. Title II Claims 4. Withdrawal or Cancellation of Conveyance
      Claims Handbook 4000.1 1624 Last Revised: 11/26/2025 (1) Appealing to the Mortgagee
      Compliance Manager If the Mortgagee disagrees with HUD’s decision to reconvey,
      the Mortgagee may appeal the Reconveyance via email in P260 to the MCM within
      10 Days from the date the response was due or received from HUD. (2) Appealing
      to HUD If the Mortgagee believes that the MCM’s decision is not supported by
      regulation or circumstances and has exhausted all appeal methods available through
      the MCM, the Mortgagee may appeal the decision to reconvey the Property to HUD’s
      Contracting Officer’s Representative (COR). The Mortgagee must submit the written
      appeal to the COR within 10 Days from the date the response was due or received
      from the MCM. HUD’s decision is final and HUD will not accept further appeals.
      ii. Reacquisition by HUD and Resubmission of Claim (A) Reacquisition (1) Definition
      Reacquisition is the process by which a Mortgagee conveys to HUD a Property
      that has been previously reconveyed to the Mortgagee. (2) Standard After the
      Mortgagee has corrected the problem causing Reconveyance, the Mortgagee may
      request reacquisition by HUD of a reconveyed Property and resubmit the claim.
      Where a Mortgagee used the CWCOT procedure and the Property was reconveyed,
      the Mortgagee may choose to retain that Property, instead of requesting reacquisition
      by HUD. (B) Reacquisition Package (1) Standard The Mortgagee must prepare and
      submit a reacquisition package to the MCM via email through P260 requesting
      permission to convey the Property to HUD. The Mortgagee must ensure that this
      package demonstrates: • that any title issues have been resolved, if applicable;
      • that any required repairs have been completed, if applicable; and • that the
      Property is ready to be conveyed to HUD. IV. CLAIMS AND DISPOSITION A. Title
      II Claims 5. Post-claim Reviews Handbook 4000.1 1625 Last Revised: 11/26/2025
      The Mortgagee must attach a copy of the Preliminary Notice of Intent to Reconvey
      in its email to the MCM. (2) Required Documentation For Properties reconveyed
      due to title issues, the Mortgagee must include in its reacquisition package:
      • documentation demonstrating that all title issues are fully remediated; and
      • for Manufactured Housing, evidence that the Manufactured Home is affixed to
      the land, is classified and taxed as real estate, and the title to the Manufactured
      Home has been surrendered or purged in accordance with the jurisdictional requirements.
      For Properties reconveyed due to damage, the Mortgagee must include in its reacquisition
      package: • current dated color photographs that support repairs; and • current
      inspection reports or other documentation evidencing that repairs have been
      completed and that the Property is in conveyance condition. (C) Resubmission
      of Claim (09/28/2020) Once the MCM accepts the Property for reacquisition, the
      Mortgagee may re-apply for insurance benefits. The Mortgagee must resubmit form
      HUD-27011, Parts A and B, as applicable, via FHA Catalyst. (D) Expenses and
      Interest after Reconveyance The Mortgagee must not include on its reacquisition
      claim any property expenses or debenture interest not included in the initial
      claim filing. HUD will not reimburse these additional expenses as part of the
      reacquisition claim. If necessary, the Mortgagee may submit a reconveyance supplemental
      claim for additional property expenses or debenture interest incurred before
      initial conveyance to HUD. The Mortgagee must submit the reconveyance supplemental
      claim within six months of the final settlement date of the reacquisition claim.
      5. Post-claim Reviews'
  judgment: false
