HUD Handbook 4000.1 Part II.A.6 — Closing (Forward Mortgages)

HUD Handbook 4000.1 Part II.A.6

a. Mortgagee Closing Requirements (01/24/2022) i. Chain of Title The Mortgagee must obtain evidence of prior ownership when a Property was sold within 12 months of the case number assignment date. The Mortgagee must review the evidence of prior ownership to determine any undisclosed Identity-of-Interest transactions. ii. Title The Mortgagee must ensure that all objections to title have been cleared and any discrepancies have been resolved to ensure that the FHA-insured Mortgage is in first lien position. (A) Good and Marketable Title The Mortgagee must determine if there are any exceptions to good and marketable title not covered by the General Waiver. See General Mortgage Insurance Eligibility and 24 CFR § 203.389. The Mortgagee must review any exceptions discovered during the title search and decide whether such title exceptions affect the Property’s value and/or marketability. If the Mortgagee determines that any exception affects the Property’s value and/or marketability, the Mortgagee must request a waiver. The Mortgagee must obtain Title Evidence demonstrating good and marketable (B) Requests for Title Exceptions Not Covered by the General Waiver The Mortgagee must submit a request for a waiver to FHA prior to endorsement when the Title Exception is not covered by the General Waiver. The request must include the case number, the specific guideline and the reason the Mortgagee is asking for the waiver. All requests must be submitted to the FHA Resource Center at [email protected] and include the following subject line: Title Exception Not Covered by General Waiver. If FHA grants the requested waiver, the Mortgagee will receive a notification in writing. The Mortgagee must place the notice of approval in the mortgage file. If the waiver request is denied and good and marketable title is not obtained, the Mortgage is not eligible for FHA insurance. (C) Manufactured Housing Good and marketable title showing the Manufactured Home and land are classified as real estate at the time of closing is required. If there were two existing titles at the time the housing unit was purchased, the Mortgagee must ensure that all state or local requirements for proper purging of the title (chattel or equivalent debt instrument) have been met, and the subject Property is classified as real estate prior to endorsement. The Manufactured Home need not be taxed as Real Property. iii. Legal Restrictions on Conveyance (Free Assumability) The Mortgagee must determine if there are any legal restrictions on conveyance in accordance with 24 CFR § 203.41. iv. Closing in Compliance with Mortgage Approval The Mortgagee must instruct the settlement agent to close the Mortgage in the same manner in which it was underwritten and approved. The Mortgagee must ensure that the conditions listed on form HUD-92900-A, HUD Addendum to Uniform Residential Loan Application, and/or form HUD-92800.5B, Conditional Commitment Direct Endorsement Statement of Appraised Value, are satisfied. v. Closing in the Mortgagee’s Name A Mortgage may close in the name of the Mortgagee or the sponsoring Mortgagee, the principal or the authorized agent. TPOs that are not FHA-approved Mortgagees may not close in their own names or perform any functions in FHA Connection (FHAC). vi. Required Forms The Mortgagee must use the forms and/or language prescribed by FHA in the legal documents used for closing the Mortgage. vii. Certifications (A) Borrower Certification The Borrower must sign the certification on form HUD-92900-A for all transactions and the Settlement Certification for purchase transactions in accordance with the instructions provided on the form. (B) Seller Certification The seller must sign the certification on the Settlement Certification for purchase transactions. (C) Settlement Agent Certification The settlement agent must sign the certification on the Settlement Certification for purchase transactions. (D) Lender Certification The Mortgagee must sign the certifications on the form HUD-92900-A in accordance with the instructions provided on the form. Projected Escrow The Mortgagee must establish the escrow account in accordance with the regulatory requirements in 24 CFR § 203.550 and RESPA. (A) Monthly Escrow Obligations The Mortgagee must collect a monthly amount from the Borrower that will enable it to pay all escrow obligations in accordance with 24 CFR § 203.23. The escrow account must be sufficient to meet the following obligations when they become due: • hazard insurance premiums; • Mortgage Insurance Premiums (MIP); • flood insurance premiums if applicable; • Ground Rents if applicable; • servicing, maintenance, repair and replacement of water purification equipment; and • any item that would create liens on the Property positioned ahead of the FHAinsured Mortgage, other than condominium or Homeowners’ Association (HOA) fees. (B) Repair Completion Escrow Requirements The Mortgagee may establish a repair escrow for incomplete construction, or for alterations and repairs that cannot be completed prior to loan closing, provided the housing is habitable and safe for occupancy at the time of loan closing. Repair escrow funds must be sufficient to cover the cost of the repairs or improvements. The cost for Borrower labor may not be included in the repair escrow

Source: HUD Handbook 4000.1 II.A.6.a.i — Chain of Title · source URL · snapshot 3bf33edadcf6461d