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HUD Updates on CWCOT Enhancements

HUD Building

HUD Building

The Federal Housing Administration (FHA) today published Mortgagee Letter (ML) 2020-21 [1], “Enhancements to FHA’s Claims Without Conveyance of Title (CWCOT) Procedures.”

According to the FHA's statement, the guidance in the ML enhances CWCOT procedures by:

The CWCOT program began in 2013 as an FHA claim option where insurance benefits are paid to a mortgagee after the sale of the property to a third-party purchaser at foreclosure of the FHA-insured mortgage or through post-foreclosure sales efforts.

In its statement, the FHA explains that these latest CWCOT enhancements announced in the ML take into consideration public feedback received earlier this year when the draft ML that was posted on the Single-Family Housing Drafting Table.

The FHA also states that these enhancements will make FHA’s CWCOT program “more viable for foreclosure sales associated with defaulted FHA-insured mortgages."

The Department of Housing and Urban Development (HUD) had previously announced changes to the FHA’s CWCOT program [3] this past February.

Changes proposed by HUD included:

“We think these changes will improve the take-up rate of the CWCOT program, which has already gone from 25% to 75%,” said Dror Oppenheimer, Senior Advisor to the Assistant Secretary for Housing—Federal Housing Commissioner at HUD at the time. “We think this is going to expand way beyond the 75% and provide real benefit for servicers and the FHA.”