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FHA Amends CWCOT Post-Foreclosure Sales Rule

The Federal Housing Administration (FHA) has issued its Mortgagee Letter (ML) 2022-08, “Expanding Affordable Housing Supply Through FHA’s Claims Without Conveyance of Title.”

By issuing ML 2022-08, the FHA will be adding an initial 30-day exclusive sales period for Claims Without Conveyance of Title (CWCOT) post-foreclosure sales for owner-occupants, HUD-approved non-profits, and governmental entities.

The CWCOT program, implemented under Mortgagee Letter 87-20, dated June 23, 1987, provides mortgagees with the procedures for bidding and payment of claims under the Single-Family FHA Mortgage Insurance program. The CWCOT program was designed to reduce the number of single-family properties added to HUD’s inventory, and allow mortgagees to file a claim without conveying title.

Under ML 2022-08, the 30-day exclusive period gives buyers an opportunity to bid on foreclosed properties before investors are allowed to bid during the CWCOT post-foreclosure sales period. ML 2022-08 also extends the mortgagee’s conveyance timeframe to provide these buyers additional time to obtain financing in order to complete the sale.

Lopa P. Kolluri, Principal Deputy Assistant Secretary for Housing and the Federal Housing Administration, said, “This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low, making it difficult for individuals and families to achieve the dream of homeownership.”

Jocelyn Martin-Leano, President, Rushmore Servicing Division of Rushmore Loan Management Services LLC also chimed in.

"Current economic conditions, rising interest rates and limited housing supply are factors that put pressure on home affordability for which there is no simple, sweeping solution," Martin-Leano said. This policy update is consistent with the Administration’s focus on affordable housing and provides another avenue towards addressing the homeownership challenge."

The provisions of ML 2022-08 may be used immediately, but must be used for all post-foreclosure sales associated with defaulted FHA-insured mortgages scheduled to occur on or after 90 days from the publication date of the Mortgagee Letter.

Mortgagees will be required to report the Delinquency/Default Status (DDS) Codes that apply to the CWCOT or CWCOT Post-Foreclosure Sale at the end of each reporting cycle in the Single-Family Default Monitoring System (SFDMS). The updated SFDMS Reporting Codes and Reporting Data Elements document will be available on the Single-Family Housing Policy Handbook 4000.1 Supplemental Documents which can be found here.

Last September, the Biden Administration announced measures that HUD would take to make more single-family homes available to individuals, families, and nonprofits rather than large investors by prioritizing homeownership and creating exclusive listing or bidding periods for targeted buyers. The FHA’s change to the CWCOT program directly supports Biden’s goal.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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