FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Claim File (08/19/2024)

FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Claim File (08/19/2024)

c. Claim File (08/19/2024) i. Standard For each claim filed, the Mortgagee must maintain evidence of compliance with HUD’s servicing requirements. In addition to retaining the documentation required in the Servicing File, the Mortgagee must include the following documentation in its Claim File: • Default servicing documentation, including: o communication with Borrowers and with HUD; o required notices; o evidence of evaluation under HUD’s Loss Mitigation Program, including 90- Day Reviews; o documentation evidencing the Mortgagee’s compliance with HUD’s reasonable diligence requirements; o documentation justifying any delays in meeting HUD time frames; and o if applicable, documentation relating to compliance with federal or state prohibitions or delays; IV. CLAIMS AND DISPOSITION A. Title II Claims 1. Claim Submission Process Handbook 4000.1 1573 Last Revised: 11/26/2025 • claims and/or conveyance documentation, including: o a copy of the first public legal action to initiate foreclosure with the date the action was taken; o a copy of the foreclosure deed recorded by the local recording authority with the date of recordation; o a copy of the first public legal action to initiate eviction, if applicable; o all documentation pertaining to bankruptcy, if applicable; o a copy of the deed or assignment with the date of recordation, along with a copy of the transmittal letter, if the deed or assignment was sent to a recording authority; o a copy of the Mortgage Insurance Certificate (MIC); o a copy of the mortgage Note and modification, if applicable; o the title approval letter, if applicable; o the title submission certification, for assignments only; o evidence showing that the certificate of title to the Manufactured Home is properly retired; o invoices and receipts or other documentation of payment made supporting all disbursements for which reimbursement is claimed. Where the Mortgagee made such disbursements in bulk, the documentation must reflect the specific disbursements made for each mortgage; o all loan servicing and transaction records (e.g., escrow history, payment history, transaction codes, collection notes, etc.) dated on or after the last complete installment date, as reported in Item 8 of Part A, form HUD-27011; o all property inspection reports (e.g., initial, occupied, and vacant); o any photographs needed to support P&P expenses and evictions; o written responses from HUD’s MCM regarding approval of extensions or expenses; o documentation to support any extensions in Items 19, 20, and 21 of Part A, form HUD-27011, if applicable; o a copy of the buydown and rental agreements; o Advice of Payment letters or claims billing statements, if applicable; o evidence of hazard insurance coverage and flood insurance coverage, if applicable; ▪ the evidence must include the name and address of the insured, the coverage type, coverage limits and deductibles, the covered period, the premium amount, and, if applicable, state-mandated surcharges; o documentation supporting the refund or estimated refund of hazard insurance premiums, if applicable; o a copy of any appraisals; o a copy of the calculation of the Commissioner’s Adjusted Fair Market Value (CAFMV); o a copy of the wire or canceled check for CWCOT and PFS claims; o a copy of the Closing Disclosure, if applicable; o for claims involving Reconveyance and reacquisition, evidence that the title or property issue requiring Reconveyance has been corrected; and IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1574 Last Revised: 11/26/2025 o all parts of the claim form, schedules, attachments, and any other supporting documents. ii. Record Retention Period The Mortgagee must retain this documentation for at least seven years after the final claim or latest supplemental claim settlement date: • The final settlement date is the date of the last acknowledgment or payment received by the Mortgagee in response to the submission of a claim. In certain cases, the acknowledgment may be in the form of a bill. • The supplemental settlement date is the date of the final payment or acknowledgment of such supplemental claim. In certain cases, the acknowledgment may be in the form of a bill. iii. Electronic Storage The Mortgagee may use electronic storage methods for all required servicing and claim- related documents where retention of a hard copy or original document is not required. iv. HUD Requests for Information The Mortgagee must make available to HUD electronic copies of identified claim files within 24 hours of a request, or as otherwise requested by HUD. HUD may charge a fee for the review of a Claim File that is not provided to HUD when requested. v. Missing Claim Files If the Mortgagee is unable to produce the Claim File at HUD’s request during the record retention period, HUD may consider all amounts for expenses and interest to have been paid in error. 2. Claim Types Mortgagees may submit the following claim types for Single Family forward Mortgages. a. Claim Type 01 – Conveyances (04/10/2025) [Updates in this section must be implemented where the deadline to meet the first legal action is on or after March 31, 2022] The Mortgagee may submit a claim after conveyance of a Property to HUD through foreclosure or by Deed-in-Lieu (DIL) of Foreclosure under Claim Type 01. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1575 Last Revised: 11/26/2025 i. Computation of Interest (A) Calculating Debenture Interest (1) Debenture Interest Rates (a) Mortgages Endorsed for FHA Insurance after January 23, 2004 For Mortgages that were endorsed after January 23, 2004, and are not Direct Endorsements, the Mortgagee must calculate debenture interest as the monthly average yield for the month in which the Default on the Mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years. (b) Mortgages Endorsed for FHA Insurance on or before January 23, 2004 For Mortgages that were insured on or before January 23, 2004, and were not Direct Endorsements, the Mortgagee must calculate the debenture interest rate as the higher of the rates in effect on: • the date the Mortgage was endorsed for insurance; or • the date of Firm Commitment. (c) Direct Endorsements and Coinsurance Programs (i) Mortgages Endorsed for FHA Insurance after January 23, 2004 For applications involving Mortgages originated under the Single Family Direct Endorsement Program and endorsed for FHA insurance after January 23, 2004, the Mortgagee must calculate the debenture interest rate as the monthly average yield for the month in which the Default on the Mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years. (ii) Mortgages Insured on or before January 23, 2004 For Direct Endorsement Mortgages insured on or prior to January 23, 2004, the Mortgagee must calculate debenture interest as the rate in effect on the date the Mortgage was endorsed for insurance. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1576 Last Revised: 11/26/2025 (2) Time Frames for Debenture Interest (a) Interest up to Date of Claim Settlement (i) Definition The Date of Initial Claim Settlement is the date that HUD approves the settlement of Part A of form HUD-27011 for payment. The Date of Final Claim Settlement is the date that HUD approves the settlement of Part B of form HUD-27011 for payment. (ii) Standard Part A Provided that the Mortgagee has met all time requirements, HUD will pay debenture interest on the unpaid principal balance from the date of Default to the date of initial claim settlement. Part B HUD will compute interest on expenditures from the date of the submission of Part B to the date of the final claim settlement. (b) Interest up to Disbursement Date (i) Definition The Disbursement Date, as applicable to claims, is the date the Mortgagee paid for an expense. (ii) Standard For each Disbursement itemized on Parts C, D and E, the Mortgagee must compute the debenture interest from the latter of the Disbursement Date or date of Default, to the earliest of the following dates: • Part A’s date of interest curtailment; • the date Part B is prepared; or • Part B’s date of interest curtailment. (iii)Required Documentation The Mortgagee must enter in Item 204 (Part C) and Item 304 (Part D) the date to which interest is calculated for expenditures claimed on form HUD-27011, Part B. This will be the same date as entered in Item 104, Part B, provided no time requirement or approved extension has been missed. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1577 Last Revised: 11/26/2025 (B) Calculating Interest for an Expenditure Using Daily Interest Rate Factors (1) Definition The Daily Interest Rate Factor is the annual interest rate expressed as a decimal, divided by 365 (or 366 in leap years), and rounded to the fourth place to the right of the decimal, for the purpose of calculating interest on claimed expenditures. (2) Standard The Mortgagee must calculate the amount of interest to be claimed for an expenditure as follows: • identify the effective debenture interest rate based on the endorsement date of the mortgage for mortgages endorsed before January 23, 2004, or the date of Default for mortgages endorsed on or after January 23, 2004; • find the Daily Interest Rate Factor (see Appendix 8.c Daily Interest Rate Factor in the Claim Filing Technical Guide) corresponding to the effective debenture interest rate; • multiply the Daily Interest Rate Factor by the amount paid; then • multiply this result by the number of Days (see Appendix 8.b Julian Calendar in the Claim Filing Technical Guide) from the date paid (or Default date, if later) for each line Item to the earlier of: o the date in Item 104 (submission date for Part B); or o the date of the earliest time requirement missed (Items 204 and 304). (3) Interest for Expenditures before the Date of Default (a) Standard If the Mortgagee makes an expenditure or advance before the date of Default, the Mortgagee may only calculate debenture interest from the date of Default. HUD will not pay debenture interest on expenses prior to the date of Default. (b) Required Documentation When filing the claim, the Mortgagee must: • enter the date of Default in the “Date Paid” column of Parts C, D, and E; and • place the actual date paid in parentheses, following the description of the expenditure or advance. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1578 Last Revised: 11/26/2025 (C) Calculating Interest for Default after Special Forbearance-Unemployment or Special Forbearance (1) Standard (a) Time Frame for Mortgage Note Interest When the Mortgagee files a claim for insurance benefits after a Default under a Special Forbearance (SFB) - Unemployment Agreement or Special Forbearance agreement, HUD will pay mortgage note interest for the period beginning on the due date of the last completely paid installment, up to the earliest of the following dates: • date of initiation of foreclosure proceedings; • date of acquisition of title and possession by DIL of Foreclosure; • date the Property was acquired by the Commissioner under a direct conveyance from the Borrower; or • 90 Days after the date of the Default of the SFB-Unemployment Agreement or Special Forbearance Agreement; or such other date as HUD may approve in writing prior to expiration of this 90-Day period. (b) Calculating Mortgage Note Interest Using Daily Interest Rate Factors To obtain the amount of accrued mortgage interest due, the Mortgagee must: • multiply the Daily Interest Rate Factor (see Appendix 8.c Daily Interest Rate Factor in the Claim Filing Technical Guide) by the amount of the unpaid principal balance; and • multiply the result by the number of days from the due date of the last completely paid installment to the date selected above as the “ending date.” (c) Time Frame for Debenture Interest When the Mortgagee files a claim for insurance benefits after a Default under an SFB-Unemployment Agreement or SFB Agreement, HUD will pay debenture interest for the period beginning on the earliest of the following dates: • the date of initiation of foreclosure proceedings; • the date of acquisition of title and possession by DIL of Foreclosure; • the date the Property was acquired by the Commissioner under a direct conveyance from the Borrowers; or • 90 Days after the date of the Default of the SFB-Unemployment Agreement or SFB Agreement, or other such date as HUD may approve in writing prior to expiration of this 90-Day period. This debenture interest period ends on the date of the initial claim payment or the date of interest curtailment. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1579 Last Revised: 11/26/2025 (d) Calculating Debenture Interest HUD will compute the debenture interest at the time of payment of Part B, using the rate in effect at the time of the mortgage Default. Where “Mortgage Note Interest” is claimed on Part B because of an SFB-Unemployment Agreement or SFB Agreement, HUD will subtract from the claim any debenture interest already paid for the same period. (2) Interest on Claim Form The Mortgagee must reflect the use of an SFB-Unemployment Agreement or SFB Agreement by entering the following in Item 121: • From: Enter the date of the last completely paid installment after all funds received under the Agreement are applied according to the terms of the Mortgage (Item 8, part A). If no Mortgage Payments were made, enter a date 30 Days before the due date of the first scheduled payment (Item 7, Part A). • To: Enter the earliest of the following dates: o the date of initiation of foreclosure proceedings; o the date of acquisition of title and possession by DIL of Foreclosure; o the date the Property was acquired by the Commissioner under a direct conveyance from the Borrower; or o 90 Days, or such other time as approved by the MCM, following the date of the Borrower’s SFB-Unemployment Agreement or SFB Agreement failure. • Rate: Enter the mortgage interest rate as it appears on the mortgage Note. • Column C: Enter the amount of mortgage interest due. (3) Required Documentation The Mortgagee must send to HUD with Part B of form HUD-27011 a copy of the: • executed SFB-Unemployment Agreement or SFB Agreement; and • the payment history. The Mortgagee must retain copies of these documents in the Claim File. (D) Curtailment of Interest (1) Definition Curtailment of Interest is the cutoff of the accrued interest calculation as of the date on which the Mortgagee fails to take a required action. The Date of Interest Curtailment is the date that the Mortgagee first failed to take a required action. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1580 Last Revised: 11/26/2025 (2) Standard The Mortgagee must self-curtail interest on Single Family claims when it fails to meet HUD’s foreclosure, reasonable diligence, or reporting time frame requirements as of the date on which the required action should have been taken. If more than one time requirement is missed and there are no applicable extensions, the Mortgagee must calculate the interest to the earliest missed time requirement. (a) Failure to Timely Initiate Foreclosure The Mortgagee must curtail interest if it fails to meet the time requirement, including applicable extensions, to initiate foreclosure, regardless of whether later payments advanced the date of Default. (b) Failure to Give HUD Notice of Foreclosure The Mortgagee must curtail interest if it fails to meet the time requirement to give notice to HUD of the foreclosure via SFDMS. Until the Mortgagee properly reports the foreclosure initiation, the Mortgagee must reduce its claim by an amount equivalent to 30 Days of interest for each SFDMS reporting cycle missed. (c) Failure to Meet Reasonable Diligence Time Frames The Mortgagee must curtail interest if it fails to meet HUD’s Reasonable Diligence Time Frames, including applicable extensions, in: • completing foreclosure; • acquiring good marketable title to and possession of the Property; and • if applicable, starting eviction or possessory action. (d) Failure to Meet Time Frame to Convey to HUD The Mortgagee must curtail interest if it fails to meet HUD’s time frame in conveying the Property to HUD. (3) Required Documentation The Mortgagee must indicate the interest curtailment date on form HUD-27011, as follows: • In Part A, the Mortgagee must enter the curtailment date in Item 31, ensuring that this date is before the date in Item 9. The Mortgagee must indicate in the “Mortgagee’s comments” section the reason for the curtailment. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1581 Last Revised: 11/26/2025 • When a curtailment date is entered in Item 204 Part C and 304 Part D, the Mortgagee must indicate in the “Mortgagee’s comments” section of Part B the reason for the curtailment. The Mortgagee must retain copies of any approved extensions received from HUD in the Claim File. (4) Remittance of Claim Payments for Failure to Self-Curtail If a Mortgagee determines during its Quality Control (QC) review that it failed to self-curtail when submitting the claim, the Mortgagee must remit claim-related payments to HUD through the Claim Remittance feature in FHAC. For more information on remitting payments, see the Quick Start: Single Family Servicing Claims Processing guide. ii. Computation of Claim Amount The Mortgagee may claim up to 100 percent of the unpaid principal balance, plus allowable costs and debenture interest. (A) Damage to Conveyed Properties (1) Definition Surchargeable Damage is damage to a Property caused by fire, flood, earthquake, hurricane, tornado, boiler explosion (for condominiums only), or Mortgagee Neglect. Mortgagee Neglect is the Mortgagee’s failure to take action to preserve and protect the Property from the time it is determined (or should have been determined) to be vacant or abandoned, until the time it is conveyed to HUD. Non-Surchargeable Damage is damage to a Property that is not Surchargeable Damage. (2) Standard (a) HUD-Required Repairs of Damage to the Property In cases of Surchargeable Damage, HUD may require the Mortgagee to repair a Property before conveyance, and the Mortgagee may not request reimbursement for such repairs. In cases of Non-Surchargeable Damage that occurred during the time of the Mortgagee’s possession, HUD may require the Mortgagee to repair such damage before conveyance, and HUD will reimburse the Mortgagee for IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1582 Last Revised: 11/26/2025 reasonable payments not in excess of the Secretary’s estimate of the cost of repair, less any insurance recovery. (b) Conveyance of Property with Surchargeable Damage Where HUD has authorized the Mortgagee to convey a damaged Property unrepaired, HUD will deduct from the mortgage insurance benefits the greater of: • any insurance recovery received by the Mortgagee; or • HUD’s estimate of the cost to repair the Property. (c) Estimating the Recovery Amount If the Mortgagee has not received the hazard insurance proceeds by the time of the Part A claim submission, the Mortgagee may estimate the recovery. (d) Adjustment of Recovery Amount If the actual recovery amount is less than the amount estimated, the Mortgagee may request reimbursement of the difference between the amount of proceeds expected and the proceeds received if both are greater than HUD’s estimate of damage. The Mortgagee is not entitled to a reimbursement if it would reduce the deduction in insurance benefits to less than HUD’s estimate of damage. (e) Mortgagee Certification for Properties Damaged by Fire (i) Definition The Mortgagee Certification for Properties Damaged by Fire is a certification prepared by the Mortgagee in order to convey to HUD certain eligible Properties damaged by fire. (ii) Standard When the Mortgagee meets all regulatory requirements for conveying a Property damaged by fire that was not covered by fire insurance at the time of the damage, or the amount of insurance coverage was inadequate to fully repair the damage, the Mortgagee must include a Mortgagee Certification at the time that a claim is filed to limit the deduction from insurance benefits to the amount of insurance recovery received by the Mortgagee, if any. The Mortgagee Certification must include the following statements: • at the time the Mortgage was insured, the Property was covered by fire insurance in an amount at least equal to the lesser of 100 IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1583 Last Revised: 11/26/2025 percent of the insurable value of the improvements, or the principal balance of the Mortgage; • the insurer later canceled this coverage or refused to renew it for reasons other than nonpayment of premium; • the Mortgagee made diligent efforts within 30 Days of any cancellation or non-renewal of Hazard Insurance, and at least annually thereafter, to secure other coverage or coverage under a Fair Access to Insurance Requirements (FAIR) Plan, in an amount at least equal to the lesser of 100 percent of the insurable value of the improvements, or the principal balance of the Mortgage, or if coverage to such an extent was unavailable at a reasonable rate (as defined in 24 CFR § 230.379(a)(4)(i)), the greatest extent of coverage that was available at a reasonable rate; • the extent of coverage obtained by the Mortgagee was the greatest available at a reasonable rate, or if the Mortgagee was unable to obtain insurance, none was available at a reasonable rate; and • the Mortgagee performed all required Property P&P actions. (iii)Required Documentation The Mortgagee must upload into P260 a copy of the Mortgagee Certification and must retain a copy in the Claim File. (f) Conveyance without Approval of Property with Unrepaired Surchargeable Damage If a Mortgagee conveys a damaged Property to HUD without prior notice or approval, the MCM will notify the Mortgagee in writing of its Finding. Depending on the extent of the damage and the MCM’s Finding, HUD may reconvey the Property and require reimbursement for all expenses incurred in connection with such acquisition and Reconveyance, or deduct from the mortgage insurance benefits the greater of HUD’s estimate of the cost of repair or any insurance recovery. (3) Required Documentation The Mortgagee must document all Surchargeable Damage and Non- Surchargeable Damage to the Property on the claim form as follows: • for Surchargeable Damage, mark “Yes” in Item 24, complete Items 26 and 27, and identify the damage in the “Mortgagee’s comments” section; • for Non-Surchargeable Damage, mark “No” in Item 24, identifying the damage in the “Mortgagee’s comments” section; and • include amounts of hazard insurance recovery received in Line 118 or, if adjusting the amount based on a Part A estimate, in Line 119. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1584 Last Revised: 11/26/2025 (4) Failure to Indicate Damage on the Claim Form If the Property is conveyed damaged but is not identified as damaged on form HUD-27011, HUD will make no further reimbursement until the MCM has evaluated the Mortgagee’s responsibility for the damage. (B) Funds Held by the Mortgagee (1) Standard HUD deducts from the mortgage insurance benefits those funds that are retained by the Mortgagee. (2) Required Documentation The Mortgagee must report these held funds as follows: • Unapplied Section 235 Assistance Payments - Item 123, Part B, Column A. • Funds Held Pursuant to a Buydown Agreement - Item 109, Part B, Column A. • Rental Income - Item 115, Part B, Column A. • Hazard Insurance Recovery - Item 118, Part B, Column A, if not reported on Part A. • Hazard Insurance Recovery - Item 27, Part A, and Item 119, Part B, column A if the entry in Part A is an estimate. • All other funds - Identify the nature and the amount of the funds and enter in Item 109, Part B, Column A. (C) Escrow Funds (1) Funds Remaining in Escrow Account (a) Standard The Mortgagee must report on the claim form those funds remaining in the escrow account on the date the deed is filed for record. (b) Required Documentation The Mortgagee must enter amounts for funds remaining in the escrow account in Item 109, Part B as follows: • The Mortgagee must include in Item 109 any funds received on the Mortgage that have not been applied to reduce the indebtedness, such as Partial Payments, hazard insurance refunds, estimated hazard insurance refunds, buydown funds, and funds held in escrow for on- site repairs. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1585 Last Revised: 11/26/2025 • For payment of expenses for which funds are escrowed, the Mortgagee must charge those payments to the escrow account until the escrow account balance equals zero. • The Mortgagee must not enter a negative balance in Item 109 and must not enter amounts for escrow advances in Items 305 or 311. The Mortgagee must include in the “Mortgagee’s comments” section an explanation of the funds included in Item 109. (2) Mortgagee Advances for Escrow Expenditures (a) Standard The Mortgagee may claim reimbursement advances for escrow expenditures. There must be no remaining funds in the escrow account. The Mortgagee must calculate interest on advances from the Disbursement Date to the earliest of the following dates: • the earliest missed time frame; or • the date the claim is prepared. (b) Required Documentation The Mortgagee must enter any advances for escrow expenditures in Items 305 or 311, as appropriate. The Mortgagee must not charge these advances to Item 109. When the first occurrence of an expense results in a negative balance to escrow, the Mortgagee must enter this amount in Item 305 or 311, whichever is appropriate. (D) Property Preservation and Protection Costs (1) Definitions P&P Actions are maintenance, security, and repair work required by HUD to ensure the Property meets HUD’s conveyance condition standards. P&P Costs do not include real estate taxes and hazard insurance premiums. The P&P Period begins on the date of commencement of the Reasonable Diligence Time Frame and continues until the end of the date established based on the aggregate calculation of the total number of days in the Reasonable Diligence Time Frame and the Conveyance Time Frame or CWCOT time frame. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1586 Last Revised: 11/26/2025 (2) Standard HUD will reimburse Mortgagees up to the Maximum Property Preservation Allowance in Appendix 7.0, or as permitted by HUD as approved over- allowables, for Property P&P actions so long as: • the actions are performed prior to or during the P&P period, even if the Mortgagee renders payment after conveyance; and • the actions are performed in accordance with HUD guidance. The Mortgagee may not request reimbursement for any costs related to obtaining bids for P&P actions. (a) Photographs The Mortgagee may request a flat fee reimbursement for photographs, regardless of the number of pictures required. (b) Inspections The Mortgagee may request reimbursement for costs for: • up to 13 inspections per calendar year per Property, with one inspection performed for each 25-35-Day cycle in accordance with HUD guidance and with additional protective measures supported by documentation; • Pre-Conveyance Inspections that do not coincide with the regular inspection schedule; and • additional inspections as otherwise required by HUD. (c) Debris Removal (i) Standard HUD will reimburse the Mortgagee for debris removal amounts up to the maximum amount in the P&P Cost schedule and up to amounts authorized by the MCM. (ii) Required Documentation The Mortgagee must retain in the Claim File: • before and after photographs reflecting the debris removal and including the date and property address; and • salvage and dumping fee receipts or other documentation stating the date, property address, number of cubic yards dumped, and number and type of appliances disposed of. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1587 Last Revised: 11/26/2025 (3) Reasonable Payments for Property Preservation and Protection Costs (a) Standard Mortgagee payments for P&P costs are considered reasonable if they are incurred prior to or during the P&P period, are otherwise reimbursable, and meet the allowances and schedules in Appendix 7.0. The Mortgagee may only include reasonable payments for P&P costs in its claim. The Mortgagee must calculate the P&P period by adding the number of Days in the Reasonable Diligence Time Frame and the Conveyance Time Frame or CWCOT time frame. The Reasonable Diligence Time Frame starts on the earlier of: • the date the first legal action should have been filed; or • the actual date the first legal action was taken. (b) Calculation of Preservation and Protection Period Reasonable Diligence Time Frame Conveyance or CWCOT Time Frame Days Total Days in P&P Period See Appendix 6.0 (plus approved extension period, if applicable) 30 Days (plus approved extension period, if applicable) Reasonable Diligence Time Frame plus conveyance or CWCOT time frame Days Mortgagees must not claim P&P costs incurred after the P&P period for reimbursement. (4) Required Documentation The Mortgagee must retain in the Claim File documentation supporting all property preservation expenses claimed by the Mortgagee. Where the Mortgagee was instructed by HUD to perform a specific service after the date of conveyance, the Mortgagee must include in the “Mortgagee’s comments” section of form HUD-27011 notation of the request and a list of expenses associated with completing the request. Mortgagees must only include reasonable P&P payments on form HUD-27011, Part C, for reimbursement. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1588 Last Revised: 11/26/2025 The Mortgagee must retain copies of any approved extensions received from HUD in the Claim File. (5) Review of Preservation and Protection Expenses (a) HUD Review HUD’s MCM will evaluate all claimed costs for P&P. HUD will require the Mortgagee to repay these costs if HUD determines that: • amounts paid for reimbursement were unnecessary, excessive, or unsupported; or • services claimed were not performed or were not performed in accordance with HUD guidance. (b) Mortgagee Determination If the Mortgagee determines any P&P costs have been incorrectly filed for reimbursement, the Mortgagee must reimburse HUD as a Claim Remittance in FHAC. (E) Homeowners’ Association/Condominium Assessments and Fees (1) Standard The Mortgagee may claim reimbursement for: • Homeowners’ Association (HOA)/Condominium Fees due within 30 Days after the date of conveyance to HUD and paid by the Mortgagee before conveyance; • penalties, interest, and/or late fees incurred by the former Borrower and paid by the Mortgagee; and • the fees and assessments amounts listed below. (a) Where HOA/Condominium Fees Survived Foreclosure (i) Fees Not Included in Foreclosure Where HOA/Condominium Fees were not included in the foreclosure proceedings and these fees survive foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees. HUD will only reimburse the Mortgagee for payment of assessments that were incurred from the foreclosure sale date to the date of conveyance. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1589 Last Revised: 11/26/2025 (ii) Fees Were Included in Foreclosure and Property Is in State Where HOA/Condominium Liens Can Take Priority When the Property is located in a state in which HOA/condominium liens can take priority over HUD’s first lien and these fees were included in the foreclosure and survived foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees. HUD will only reimburse Mortgagees for HOA Fees up to the total value of the periodic HOA/Condominium Assessments due and paid from the date the Borrower defaulted on their HOA/Condominium Assessment to the date of conveyance. (b) Where There Is an HOA/Condominium Lien That Survives Foreclosure When the Property is not located in a state in which HOA/Condominium Fees can take priority over HUD’s first lien, the fees were included in the foreclosure, and there is a lien on the Property that survives foreclosure, the Mortgagee may claim reimbursement for the negotiated amount required to obtain a release of outstanding HOA/Condominium Fees. HUD will only reimburse Mortgagees for HOA Fees up to the state law mandated amount. (c) Where HOA/Condominium Fees Do Not Survive Foreclosure or Create a Lien Where HOA/Condominium Fees will not survive foreclosure or create a lien surviving foreclosure, the Mortgagee may claim reimbursement for the HOA/Condominium Assessment amounts required under applicable law. (2) Required Documentation After resolving HOA/Condominium Fee amounts, the Mortgagee must perform the following in P260: • no later than 15 Days after conveyance, upload into P260 the paid HOA/condominium invoice and any documentation necessary to verify that the Mortgagee made such payments prior to conveyance; and • document in P260 any common area requirements associated with gaining access to the Property. The Mortgagee must also reflect the amounts on form HUD-27011 as follows: • enter HOA/condominium amounts in Item 111 of Part B and Item 305 on Part D; and IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1590 Last Revised: 11/26/2025 • document the payment of all final bills and liens for HOA/Condominium Fees in the “Mortgagee’s comments” section of Part C. (F) Hazard and Flood Insurance Premiums HUD will reimburse the Mortgagee for hazard insurance premiums and flood insurance premiums paid to protect the Mortgagee’s interest up until the date the deed to the Secretary is filed for record, so long as the hazard insurance and flood insurance premiums were paid in accordance with HUD guidance. If the Mortgagee force-places a Private Flood Insurance (PFI) policy to satisfy the mandatory Flood Insurance purchase requirement, the PFI must meet the requirements for Flood Insurance. (1) Calculating the Hazard and Flood Insurance Premium Refund If the amount of the actual premium refund is not known at the time Part B of form HUD-27011 is prepared, the Mortgagee must calculate an estimate on a “short rate” basis as follows: • determine the number of Days the policy was in effect, from the effective date of the policy to the earlier of the cancellation date or the date the deed to the Secretary was filed for record (see Appendix 8.b Julian Date Calendar of the Claim Filing Technical Guide); • use the Short Rate Method Table in Appendix 8.a of the Claim Filing Technical Guide to determine the percentage of the premium utilized, and subtract this figure from 100 to determine the percentage of premium remaining; and • multiply the percentage of premium remaining by the total premium to determine the estimated amount of the premium refund. (a) Actual Hazard and Flood Insurance Premium Refund More than Estimated Refund If the actual premium return is $10 or more than the Mortgagee’s estimated amount, the Mortgagee must file a supplemental remittance. (b) Actual Hazard and Flood Insurance Premium Less than Estimated Refund If the actual premium return is less than the Mortgagee’s estimated refund, the Mortgagee may request a refund by: • filing a supplemental claim form; and • providing a copy of the insurance carrier’s statement of the return premium. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1591 Last Revised: 11/26/2025 (2) Required Documentation The Mortgagee must include the refund amount or estimated refund amount in Item 109, Part B of form HUD-27011, and include in the “Mortgagee’s comments” section the amount and whether this amount is actual or estimated. (3) Claims without Estimated Hazard Insurance and Flood Insurance Premium Refunds or Where No Refund Was Received The Mortgagee may submit a Part B claim without an estimated hazard or flood insurance premium refund, provided the Mortgagee includes documentation to HUD demonstrating: • that the insurer remitted the refund to the Borrower; or • that the insurer has a policy of not remitting funds to the Mortgagee in that jurisdiction. If the Mortgagee submits a Part B claim with an estimated hazard or flood insurance premium refund, but the refund was not received, the Mortgagee may submit a supplemental claim for reimbursement of the estimated hazard or flood insurance premium refund entered on line 109 of the Part B claim, provided the Mortgagee includes documentation to HUD demonstrating: • that the insurer remitted the refund to the Borrower; or • that the insurer has a policy of not remitting funds to the Mortgagee in that jurisdiction. (G) Utility Bills The Mortgagee may request reimbursement for final utility bills by itemizing them in Item 305 of Part D of form HUD-27011. (H) Eviction and Other Possessory Action Costs (1) Definition Eviction and Other Possessory Action Costs are those costs associated with gaining possession of an occupied Property. (2) Standard The Mortgagee may request full reimbursement of eviction and other possessory action costs that are: • required by state and local law in jurisdictions where the Mortgagee is required to bring a separate possessory action in addition to foreclosure; and • reasonable and customary for that jurisdiction and actually necessary to accomplish the eviction or other possessory action. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1592 Last Revised: 11/26/2025 Where debris removal is required by state and local law as part of the eviction or possessory action, the Mortgagee may claim these costs as eviction costs. HUD will not reimburse the Mortgagee for the following fees and costs: • fees and costs in excess of reasonable and customary fees and costs and lacking documentation supporting the amount claimed; • fees and costs unnecessary for the protection, acquisition, or conveyance of the Property, such as courier services, document retrieval, express mail, or property inspection by attorneys; • Mortgagee’s overhead items such as postage, telephone, duplication, or collection services; or • compensation paid to an attorney or trustee who is a salaried employee of the Mortgagee. (3) Required Documentation The Mortgagee may include costs for evictions and possessory actions in Line 111 of form HUD-27011. The Mortgagee must include in the Claim File documentation supporting any claimed costs associated with compliance with state and local law. (I) Tax Bills (1) Standard The Mortgagee may request reimbursement for all tax bills paid. The Mortgagee may not request reimbursement for late fees and/or interest penalties charged by the taxing jurisdiction for late payment of taxes. (2) Required Documentation The Mortgagee must: • upload into P260 any documentation (such as a paid receipt, a copy of the Mortgagee’s tax payment history screen, a report, or screenshot of a report, from a tax monitoring service indicating that property taxes are not delinquent, or other documentation showing the amount paid, the purpose of the payment, and the date the payment was made by the Mortgagee) that is necessary to validate that such payment was made; • certify in the claim form that all tax bills due within 30 Days of conveyance are paid as of the date of conveyance; • document payment of tax bills in Item 32, “Schedule of Tax Information,” of Part A of form HUD-27011; and IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1593 Last Revised: 11/26/2025 • retain invoices, paid bill receipts, a report from a tax monitoring service indicating that property taxes are not delinquent, and other documentation necessary to validate that such payment was made in the Claim File. (J) Deed-in-Lieu Borrower Consideration To claim the DIL Borrower Consideration after successful use of DIL in accordance with HUD policies, the Mortgagee must enter it in Item 305 as an Acquisition Cost. (K) Attorney’s Fees (1) Standard (a) Up to Maximum Fee in HUD Schedule The Mortgagee may claim reimbursement for up to the amounts shown on the HUD Schedule of Standard Possessory Action and Deed-In-Lieu of Foreclosure Attorney Fees for fees reasonably relating to the amount of work performed for the current Default. The Mortgagee may claim no more than 75 percent of the maximum attorney fee for incurred fees associated with a routine foreclosure that was not completed because any of the following occurred after the Mortgagee initiated foreclosure: • the Borrower filed for a bankruptcy petition; • the Borrower executed a DIL of Foreclosure; or • the Borrower successfully completed a PFS. HUD will reimburse allowable attorney fees in accordance with HUD guidance pertaining to the reimbursement of foreclosure costs. (b) For Amounts Exceeding the Maximum Fee and Not Provided for in HUD Schedule For additional expenses incurred due to required legal actions such as mediation or probate proceedings, the Mortgagee may claim reimbursement for these costs by: • providing a documented cost breakdown and written justification with the claim submission, and retaining a copy in the Claim File; and • filing a supplemental claim for amounts above the maximum fee. (c) Fees Relating to Bankruptcy The Mortgagee may claim reimbursement for attorney’s fees as follows: • up to the fee set in the HUD Schedule for costs actually incurred for each bankruptcy; or IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1594 Last Revised: 11/26/2025 • reasonable and customary attorney’s fees incurred when the bankruptcy was not routine. Mortgagees may not claim additional attorney’s fees for defending against court-ordered involuntary principal reductions (or “cramdowns”) as part of a bankruptcy, nor may Mortgagees claim fees that have already been included in a Loss Mitigation Option. (2) Required Documentation The Mortgagee may claim reimbursement for attorney’s fees by entering into Part D of the initial filing of form HUD-27011 the following information: • Item 305, “Disbursements for HIP, taxes, ground rents and water rates (which were liens prior to mortgage), eviction costs and other disbursements not shown elsewhere,”: Enter up to the maximum fee set forth in the Appendix 5.0 – HUD Schedule of Standard Possessory Action and Deed-In-Lieu of Foreclosure Attorney Fees (Applies to Servicing Only) for possessory actions. • Item 306, “Attorney/Trustee Fees”: Enter the amount of attorney or trustee fees actually incurred. The Mortgagee must itemize the elements of the fee if the fees exceed the amount that is HUD-approved for the area. • Item 307, “Foreclosure and/or acquisition, conveyance and other costs”: Itemize any other legal costs paid by the Mortgagee, not including disbursements shown in Item 306. Mortgagees must not enter attorney’s fees in Item 307. • Item 310, “Bankruptcy”: Enter an amount up to the maximum fee set forth in the HUD Schedule for costs actually incurred for each bankruptcy and reasonable and customary attorney’s fees incurred when the bankruptcy was not routine. (L) Foreclosure and Acquisition Costs (1) Definition Foreclosure and Acquisition Costs are those costs associated with the Mortgagee’s foreclosure of the Property and acquisition of good marketable title to the Property. (2) Standard The Mortgagee may request reimbursement for fees and costs that are: • necessarily incurred in foreclosure proceedings; and • reasonable and customary in the area. For all Mortgages endorsed prior to February 1, 1998, HUD will reimburse the Mortgagee’s foreclosure costs at two-thirds of the foreclosure costs. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1595 Last Revised: 11/26/2025 For all Mortgages endorsed on or after February 1, 1998, HUD will reimburse the Mortgagee’s foreclosure costs based on the Tier Ranking System (TRS) ranking of the Mortgagee as of the date the Part B claim is received by HUD as follows: • for non-Tier 1 Mortgagees, 67 percent of foreclosure costs; and • for Tier 1 Mortgagees, 75 percent of foreclosure costs. HUD will not reimburse the Mortgagee for the following fees and costs: • fees and costs in excess of reasonable and customary fees and costs, which lack documentation supporting the amount claimed; • fees and costs unnecessary for the protection, acquisition, or conveyance of the Property, such as courier services, document retrieval, express mail, or property inspection by attorneys; • Mortgagee’s overhead items such as postage, telephone, duplication, or collection services; • compensation paid to an attorney or trustee who is a salaried employee of the Mortgagee; or • extra costs incurred in foreclosures that result from defects in the mortgage transaction or foreclosure or defects in the title existing at or before the time the Mortgage was filed for record. HUD may reimburse these costs if the Mortgage was sold by the Secretary or was executed in connection with the sale of a Property by the Secretary after August 1, 1969. (3) Required Documentation The Mortgagee must reflect total foreclosure costs in Items 306, 307, and 310 of form HUD-27011. HUD will then calculate either the two-thirds or 75 percent allowance, as appropriate, for both expenses and interest. (M) Bankruptcy HUD will reimburse fees related to bankruptcy as based on the Mortgagee’s tier ranking. HUD will reimburse allowable bankruptcy fees in accordance with HUD guidance pertaining to the reimbursement of foreclosure costs. If there are multiple bankruptcies for a Mortgage in Default, the Mortgagee may request reimbursement for the fees and costs related to each filing. (1) Extension for Initiation of Foreclosure (a) Standard If the Mortgagee is unable to initiate foreclosure due to the Borrower’s filing of bankruptcy and the time limit to initiate foreclosure had not expired prior to the bankruptcy petition being filed, the Mortgagee may reflect the use of the 90-Day extension to initiate foreclosure by entering in form HUD-27011: IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1596 Last Revised: 11/26/2025 • the date of the filing of the bankruptcy petition in Item 40; • the release date of the bankruptcy stay in Item 21; • a date 90 Days after the release of the bankruptcy stay, including any applicable extensions, in Item 19; and • the date the foreclosure action was initiated or reinitiated, if canceled due to the bankruptcy, in Item 11. (b) Required Documentation The Mortgagee must retain in the Claim File: • dated copies of the court’s release form the bankruptcy stay; • copies of any demand letters or notices required by applicable state law; and • any approvals for extensions received by HUD. (2) Extensions for Foreclosure Completion If the Mortgagee is unable to timely complete the foreclosure due to the filing of a bankruptcy petition, the Mortgagee must: • note the cause of the delay in the “Mortgagee’s comments” section of Part A; and • retain supporting documentation in the Claim File. (N) Rental of the Property (1) Standard HUD will not reimburse the Mortgagee for costs incurred solely in renting the Property prior to conveyance. If rental produces a net profit, HUD will reduce the amount of the claim by that profit. (2) Required Documentation If the Mortgagee rents the Property, the Mortgagee must include on form HUD- 27011: • any Rental Income on Item 115, Part B; and • rental expenses, as an offset to Rental Income, on Item 116, Part B. (O) Section 235 Assistance Payments (1) Unapplied Payments The Mortgagee must return unearned Section 235 assistance to HUD via the Section 235 billing process. The Mortgagee must apply earned payments to the Borrower’s account in full installments to advance the date of account and report Partial Payments in Item 123 of Part B. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1597 Last Revised: 11/26/2025 (2) Overpaid Assistance For funds that were advanced to repay overpaid Section 235 assistance to HUD and were not recovered from the Borrower, the Mortgagee must enter the unrecovered advance in Item 123, Column B, Part B. (P) Deficiency Judgments (1) Standard When HUD required the deficiency judgment action or when HUD has approved the Mortgagee’s request to pursue the Judgment, the Mortgagee may request full reimbursement of the following fees: • cost of reasonable and customary attorney fees which relate only to obtaining the deficiency Judgment; • additional filing or recording fees directly related to the deficiency Judgment; and • if local law required a judicial foreclosure in order to obtain a deficiency Judgment, those costs directly related to the judicial foreclosure. (2) Required Documentation The Mortgagee must note costs related to deficiency Judgments in Item 410 of form HUD-27011. (Q) Late Fees and Interest Penalties Unless otherwise stated specifically in this Handbook 4000.1 or otherwise authorized by HUD, the Mortgagee may not request reimbursement for late fees and/or interest penalties on escrowed items. iii. FHA Refinance of Borrowers in Negative Equity Positions Submission of Claim to HUD For claims for Mortgages under the FHA Refinance of Borrowers in Negative Equity Positions, or FHA Short Refinance program, the Mortgagee may file a conveyance claim and request reimbursement for all allowable Part B expenses. iv. Submission of Claim Form Parts to HUD for Conveyance Claims (A) Submission of Part A (1) To HUD The Mortgagee must submit Part A to HUD headquarters via EDI, FHAC, or FHA Catalyst. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1598 Last Revised: 11/26/2025 The Mortgagee must submit Part A no later than two business days after the date the deed to HUD is filed for record or mailed to the recording authority. (2) To P260 The Mortgagee must upload into P260: • a copy of Part A; • a copy of the deed to the Secretary of HUD, their successors and assigns filed for record; • documentation of the last tax bills paid to each taxing authority; • a copy of HUD’s letter approving damaged conveyance of the Property under 24 CFR § 203.379(a), if applicable; • the Mortgagee’s certificate that the conditions of 24 CFR § 203.379(b), relating to fire damage, have been met, if applicable; and • a copy of documentation that will verify that appropriate action was taken to protect and preserve the Property. The Mortgagee must upload these documents no later than two business days after the date the deed to HUD is filed for record or mailed to the recording authority. (B) Submission of Parts B, C, D, and E (1) To HUD The Mortgagee must submit Part B to HUD headquarters via EDI, FHAC, or FHA Catalyst. When submitting via FHA Catalyst the Mortgagee must also submit Parts C, D, and E. The Mortgagee must submit Part B within the later of: • 45 Days after the deed was filed for record or mailed or submitted to the recording authority; or • 15 Days after the Title Approval Date in FHAC. The Mortgagee must retain Parts C, D, and E in the Claim File. (2) To P260 The Mortgagee must upload into P260: • Parts B, C, D, and E; and • required supporting documentation of amounts claimed. The Mortgagee must upload into P260 Parts B, C, D, and E within the later of: • 45 Days after the deed was filed for record or mailed or submitted to the recording authority; or • 15 Days after the Title Approval Date in FHAC. IV. CLAIMS AND DISPOSITION A. Title II Claims 2. Claim Types Handbook 4000.1 1599 Last Revised: 11/26/2025

Source: FHA Single Family Housing Policy Handbook 4000.1, Part IV — c. Claim File (08/19/2024) · source URL · snapshot 8c03836f77f317e1