Surchargeable Damage is damage to a Property caused by fire, flood, earthquake, tornado, boiler explosion (for condominiums only) or Mortgagee Neglect.
The Mortgagee is responsible for the cost of Surchargeable Damage.
The Mortgagee must request National Servicing Center (NSC) approval via the Extensions and Variances Automated Requests System (EVARS) before approving the use of the Pre-Foreclosure Sale (PFS) Option for a Property with Surchargeable Damage as follows:
- The Mortgagee must first obtain the Government’s Estimate of the Cost to Repair the Surchargeable Damage by contacting HUD’s Mortgagee Compliance Manager (MCM).
- Upon receipt of the Government’s Estimate of the Cost to Repair, the Mortgagee must submit form HUD-90041, Request for Variance: Pre-foreclosure Sale Procedure, via EVARS to obtain NSC approval prior to entering into a PFS Agreement with the Borrower. The Mortgagee must note on the variance request the specific reason for the request and attach any supporting documents needed for the NSC’s review.
If the Property is being sold “As Repaired” and funds for surchargeable repairs will be escrowed or provided as a credit to the Borrower at closing, the Mortgagee must not include in its Net Sale Proceeds calculation the amount of the repair escrow or repair credit.
If the damage is not considered Surchargeable Damage, the Mortgagee is not required to obtain NSC approval prior to approving the PFS Agreement.
Where applicable, the Mortgagee must work with the Borrower to file a hazard insurance claim and either:
- use the proceeds to repair the Property; or
- adjust the PFS Claim by the amount of the insurance settlement (non-surchargeable damage) or the Government’s Repair Cost Estimate.
HUD MCM’s contact information is on HUD’s web page, Mortgagee Compliance Manager (MCM) Information, available at: https://www.hud.gov/program_offices/housing/sfh/nsc/mcm
Form HUD-90041, Request for Variance: Pre-foreclosure Sale Procedure is located at: https://www.hud.gov/program_offices/administration/hudclips/forms/
Technical support on Extensions and Variances Automated Requests System (EVARS) and E-Class at: helpdesk@hudnsc.org
Toll-Free Number: 1-888-647-5893. For Speech and Hearing Impaired (TeleTypewriter): 1-801-741-1437
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.
For policy information see Handbook 4000.1 III.A.2.l.ii(B)(2)-(4) and IV.A.2.a(ii)(A) available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh