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