Must the Mortgagee allow reinstatement of the mortgage if the borrower brings the account current?

The Mortgagee must allow reinstatement of the Mortgage if the Borrower offers, in a lump sum payment, all amounts to bring the account current, including costs incurred by the Mortgagee in instituting foreclosure, except under any of the following circumstances:
  • within the two years immediately preceding the initiation of the current foreclosure action, the Mortgagee has accepted reinstatement in a previous foreclosure action;
  • reinstatement will preclude foreclosure following a subsequent Default; or
  • reinstatement will adversely affect the priority of the mortgage lien. 
When a Mortgage in Default is reinstated, the Mortgagee may charge the Borrower the costs of property inspections and/or preservation, so long as the costs are:
  • reasonable and customary for those services, as established in the Mortgagee Property Preservation and Protection Action section; and
  • consistent with HUD requirements, state law, and security instruments. 
The Mortgagee may collect the cost of the inspections from the Borrower only when:
  • the Mortgage was reinstated or paid in full;
  • the Mortgagee has performed and properly documented the inspections pursuant to HUD requirements; and
  • the cost of each inspection was reasonable and within the cost limitation established by HUD.
The Mortgagee must not collect inspection costs from the Borrower's escrow account or charge for an Occupancy Inspection performed after successful contact with the Borrower or occupant.
 
If the Mortgagee cancels a foreclosure action for a Loss Mitigation Option, a reinstatement, or a payment in full, the Mortgagee may charge the Borrower for attorney’s fees as follows:
  • The attorney’s fees to be paid by the Borrower must be commensurate with the work actually performed to that point.
  • The amount charged may not be in excess of the fee that HUD has established as reasonable and customary for claim purposes. 
If the Mortgagee is using Claim Without Conveyance of Title (CWCOT) procedures and the Borrower reinstates the Mortgage after foreclosure has been instituted, the Mortgagee must:
  • cancel the appraisal if the appraisal has not yet been completed; or
  • request that the Borrower reimburses the Mortgagee for the cost of the appraisal as part of foreclosure-related expenses, if the appraisal cost was validly incurred.  

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.q.i-iii. at:
https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

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-03924