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HUD to require mortgagees to use FHA loss mitigation during bankruptcyMortgagePress.comHUD, loss mitigation, FHA, bankruptcy, Mortgagee Letter 2008-32 On Oct. 17, the U.S. Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2008-32 (ML 08-32), announcing that mortgagees must, upon receipt of notice of a bankruptcy filing: (i) Send information to a debtor's counsel indicating that loss mitigation may be available, and (ii) Provide instructions sufficient to facilitate workout discussions, including documentation requirements, time-frames, and servicer contact information. The provisions are effective immediately. ML 08-32 supersedes the guidance regarding mortgagors in bankruptcy provided in Mortgagee Letter 2000-05, which generally prohibited mortgagees from offering loss mitigation to a borrower in bankruptcy. Mortgagees may now offer appropriate loss mitigation options through the debtor's counsel prior to discharge or dismissal without requiring relief from the automatic stay and, in the case of a Chapter 7 bankruptcy, without requiring re-affirmation of the debt. All loss mitigation actions must be approved by the Bankruptcy Court prior to final execution. For a copy of ML 08-32, click here.