What are the requirements if a borrower fails to perform obligations contained in the Security Instruments?

By executing the Deed of Trust/Security Instrument and Note for an FHA-insured Mortgage, the Borrower agrees to submit the monthly Mortgage Payment by the first of each month and to adhere to the uniform covenants listed in the Deed of Trust/Security Instrument and Note. The following provides guidance associated with the Borrower’s failure to adhere to these covenants.
Non-Monetary Default is a Default where the Borrower fails to perform obligations, other than making monthly payments, contained in the mortgage security instrument for a period of 30 Days.
When the Non-Monetary Default may be cured or otherwise resolved by Mortgagee action without resorting to foreclosure action, the Mortgagee must advance and charge to the Borrower all amounts due for servicing activities, as defined in the mortgage agreement, if:
  • the Borrower fails to make required payments or charges;
  • the Borrower fails to perform any other covenants and agreements contained in the Deed of Trust/Security Instrument; or
  • there is a legal proceeding that may affect the Mortgagee’s rights in the Property.
If the Borrower fails to maintain hazard insurance coverage when it is stated as an obligation in the Mortgage, the Mortgagee may advance funds or force-place insurance as follows.
  • The Mortgagee may advance the funds to pay the renewal premiums. The Mortgagee must renew the same type of policy and the same coverage carried previously by the Borrower.
  • If Borrowers fail to renew hazard insurance coverage when required, the Mortgagee may force-place hazard and/or flood insurance where consistent with federal regulations. While the Mortgagee may, at its discretion, obtain more coverage than is necessary to protect the Mortgagee’s interest, HUD limits its reimbursement of these premiums.
The Mortgagee may advance funds and charge the Borrower when the Borrower fails to pay taxes, assessments, water rates, and other governmental or municipal charges, fines, or impositions not included in the Borrower’s monthly Mortgage Payment.
If the Borrower fails to pay Condominium/HOA Fees, the Mortgagee must take any action necessary to protect the first-lien position of the FHA-insured Mortgage against foreclosure actions brought by a condominium/HOA or any other junior lien holder.
If the Borrower fails to address a code violation notice from the municipality where the Property is located, the Mortgagee must perform activities necessary to preserve and protect the Property, as authorized under the security instruments. See Mortgagee Property Preservation and Protection.
The Mortgagee must forward copies of all notices pertaining to demolition orders and hearings to HUD’s Mortgagee Compliance Manager (MCM) immediately upon discovery. The MCM will advise the Mortgagee as to whether to proceed with the demolition or to postpone the demolition until after conveyance to HUD.
The Mortgagee must review the Mortgage’s legal documents to determine any covenant restrictions pertaining to assumption. See Assumptions (Section III.A.3.b) in Handbook 4000.1.
Any questions may be directed to the FHA Resource Center Toll-Free Telephone Number at (800) CALLFHA (225-5342) or by email to answers@hud.gov.  Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at (800) 877-8339. 

See policy in Handbook 4000.1 Section III.A.2.n. at:

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-03894