COVID-19: May the Title I maximum claim periods be extended to allow additional time for Title I Lenders to explore loss mitigation options for borrowers impacted by COVID-19?

Handbook 1060.2, Title I Property Improvement and Manufactured Home Loan Regulations, provides the standard maximum claim periods stating that an insurance claim shall be filed no later than the following dates:
  • Property Improvement Loans: Nine months after the date of default.
  • Manufactured Home Loans: Three months after the date of sale of the property securing the loan, but not to exceed 18 months after the date of default.
However, on August 11, 2020, HUD issued Title I Letter 487 which provides Title I Lenders an optional extension to the maximum claim periods to engage in loss mitigation efforts and put in place alternative repayment arrangements for Borrowers who are experiencing a financial hardship as a result of the COVID-19 pandemic.
 
Title I Lenders may use the extension to delay filing a claim within the normal claim filing windows and must contact the Borrowers to discuss the reasons for default and explore a cure. To help Borrowers avoid a claim, Title I Lenders may provide loss mitigation options in lieu of sending a notice of default and acceleration.  The extension to the maximum claim period is not available if the Title I Lender determines the property associated with the delinquent Title I Loan is vacant or has been abandoned.
 
Lenders should consider a broad range of servicing and loss mitigation options that could assist delinquent Borrowers in bringing the Loan current. These options include mortgage modification, refinance, repayment plan, assumption, and waiver of late charges and other fees. Title I Lenders availing themselves of the extension provided in this Title I Letter may provide Borrowers in default with forbearance for the additional time as may be reasonably needed to arrange repayment plans or modification agreements that would bring the loan current. If a claim is filed, the applicable HUD claim form and loan servicing records must reflect that the Borrower was impacted by COVID-19, and an extension was necessary to provide the Borrower with the opportunity to bring the loan current.  Servicing efforts to offer loss mitigation must be documented in the Title I lender or Servicing Agent’s servicing notes.
 
The optional extension to the maximum claim period is available immediately for all Title I Property Improvement Loans and Manufactured Home Loans that were current or less than 30 Days past due as of March 1, 2020 and have subsequently gone into default, provided the default occurred prior to November 30, 2020.
 
For additional information, see: 

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-05591