Safeguard Properties - HUD ML 2008-27 Treble Damages for Failure to Engage in Loss Mitigation

HUD ML 2008-27 Treble Damages for Failure to Engage in Loss Mitigation

Tuesday, 07 October 2008

The Dept. Of Housing and Urban Development has released Mortgagee Letter (ML) 2008-27 titled "Treble Damages for Failure to Engage in Loss Mitigation".

The purpose of this Mortgagee Letter is to provide information regarding the Civil Money Penalty that will result in Treble Damages for a mortgagee’s failure to engage in loss mitigation.

Treble Damages may be assessed when a mortgagee fails to engage in loss mitigation. On April 26, 2005, the Department published a final rule, “Treble Damages for Failure to Engage in Loss Mitigation”, advising the industry of this Civil Money Penalty. A copy of the final rule is available at http://www.gpoaccess.gov/fr/index.html.

Available Resources to Assist Mortgagees
HUD’s National Servicing Center (NSC) is available to assist mortgagees in complying with FHA servicing requirements, including loss mitigation evaluation. The NSC offers Loss Mitigation training to lenders via scheduled classes throughout the year and participates in joint training with regional and national industry groups such as the Mortgage Bankers Association (MBA).

The NSC provides a toll-free telephone line (1-888-297-8685) to provide assistance regarding FHA’s Servicing requirements, including HUD’s Loss Mitigation Program. This assistance is available to mortgagors and mortgage industry professionals. Information from HUD’s National Servicing Center (NSC) is available via the following website: http://www.hud.gov/offices/hsg/sfh/nschome.cfm.

Avoiding Treble Damage Penalty Assessments

There are three key actions that mortgagees must take to help avoid assessment of treble damages for failure to engage in loss mitigation.

First, mortgagees must ensure that the loss mitigation evaluations are completed for all delinquent mortgages before four full monthly installments are due and unpaid.
Second, mortgagees must ensure that the appropriate action is taken based on these evaluations.
Third, mortgagees must maintain documentation of all initial and subsequent loss mitigation evaluations and actions taken.

Failure to Engage in Loss Mitigation
Failure to engage in loss mitigation is defined as:

A mortgagee’s failure to evaluate a loan for loss mitigation before four full monthly mortgage installments are due and unpaid to determine which, if any, loss mitigation techniques are appropriate (see 24 CFR § 203.605); and/or
A subsequent failure to take appropriate loss mitigation action(s).

Mortgagees must be able to provide documentation of their loss mitigation evaluations and actions. Mortgagees will be considered to be in compliance with 24 CFR § 203.501 where plausible loss mitigation options were offered to eligible borrowers. The Department will not consider a mortgagee to have “failed to engage in loss mitigation” where the mortgagee can demonstrate that a borrower was uncooperative or ineligible.

Treble Damages’ Assessments
HUD assesses civil money penalties against approved mortgagees through the Mortgagee Review Board (the Board) under 24 C.F.R. Parts 25 and 30. HUD will not assess treble damages for failure to engage in loss mitigation on any loan where the date of default occurred before May 26, 2005, the rule’s effective date. If it is determined that civil money penalties for failure to engage in loss mitigation, or other violations of 24 CFR § 30.35 are warranted, the mortgagee will receive a notice from the Board. Mortgagees will have 30 days from receipt of any notice to provide the Board with a written response. If a mortgagee does not respond, the Board will determine the appropriate action to be taken, based upon all available information. Mortgagees may appeal Board determinations to HUD’s Office of Administrative Law Judges.

Questions regarding this Mortgagee Letter may be directed to HUD’s National Servicing Center at (888) 297-8685.

To view the online ML, please click here.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 500 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.