What do I do if my previously FHA-insured loan was acquired by HUD, sold to a third party in the 1990s, and the current servicer is threatening to foreclose on me based on debt allegedly incurred during HUD’s ownership of my loan?

Beginning in the early 1960s, up to 1996, HUD operated a single-family assignment program under which it took in nonperforming mortgage loans from lenders in exchange for mortgage insurance claim payments. Once a mortgage loan was assigned to HUD under this program, the loan would have been owned by HUD and would no longer have been FHA-insured. After acquiring a mortgage loan under this program, HUD was able to offer various forms of foreclosure alternative relief to the borrower. The form of relief offered could vary based on the borrower’s circumstances, but a common form of relief was a forbearance agreement. Under a forbearance agreement, a borrower would have been allowed to skip some monthly payments, but interest continued to accrue on the loan in the meantime, which would then have to be repaid by borrower.  In 1996, Congress withdrew authority for the assignment program, and the program was then terminated.  After termination of the assignment program, HUD sold numerous of these assignment program loans to a third party, which would have then been allowed to collect amounts owed under the notes (including, if applicable, any extra interest accrued during a forbearance period). Following the sales of these loans, HUD had no further involvement with the servicing of the loans.      

Borrowers who participated in this old assignment program and who have questions about the amounts owed under their notes should contact the current owner or servicer of their loan.  If a borrower believes that the current loan owner or servicer is not properly servicing the loan or is not complying with the law, the borrower should consult with his or her own counsel or contact the state or federal entity authorized to enforce mortgage banking regulations (e.g., the Consumer Financial Protection Bureau). 

Consumer Financial Protection Bureau https://www.consumerfinance.gov/

HUD Policy Determination

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-01220