When must the Commissioner’s Adjusted Fair Market Value (CAFMV) be used by the Mortgagee?

Unless otherwise required by statute or jurisdiction, the Mortgagee must use the Commissioner's Adjusted Fair Market Value (CAFMV) for all foreclosure sales and Post-Foreclosure Sales Efforts associated with default FHA-insured Mortgages when eligible for Claims Without Conveyance of Title (CWCOT).  A Mortgages in default is eligible for CWCOT when all the following criteria are met:
  • the FHA-insured mortgage insurance is still active for the FHA case number;
  • the Mortgagee has worked with the Borrower to exhaust all applicable Home Retention Options and has determined that the Borrower’s situation does not meet the criteria for a Home Disposition Option, or the Mortgagee has been unable to locate the Borrower, and the Property is vacant or has been abandoned by the Borrower;
  • the Property has no Surchargeable Damage; and
  • if the Mortgagee were to file a conveyance claim, the Mortgagee’s projected conveyance claim amount would be equal to or greater than the CAFMV.
Either the Mortgagee or a third party will be the successful bidder at the foreclosure sale. Notwithstanding the foreclosure sale, the Borrower or a third party may exercise a legal right and redeem the Property.

Note: FHA is permitting, but not requiring, the use of CAFMV by Small Servicers, defined in
12 CFR 1026.41(e)(4)(ii) available at: https://www.law.cornell.edu/cfr/text/12/1026.41

Any questions may be directed to the FHA Resource Center by email at: answers@hud.gov, or the toll-free telephone number at (800) CALLFHA (225-5342).  Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at (800) 877-8339.

For additional information, see policy in Handbook 4000.1 III.A.2.p.ii(B) and III.A.2.p.v available at:
Mortgagee Letter 2020-21 is available at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

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-03900