HUD has released Mortgagee Letter 2006-12 providing additional instructions regarding properties located in the Individual Assistance areas.

Since August 2005, HUD has provided notification, direction and assistance through various Mortgagee Letters, with the most recent being ML 2006-05.

ML 2006-05 extended the foreclosure moratorium 120 days, and it now expires on June 30, 2006, for borrowers located in the FEMA Individual Assistance areas who are unable to maintain mortgage obligations due to hurricane-related property damage, curtailment of income, or increased living expenses. 

To be eligible for the full 120-day extension, borrowers were required to contact their mortgage holder on or before March 31, 2006, and make a written commitment to work with the mortgagee to develop a plan to resolve the delinquency.

However, due to continued uncertainty in the Gulf region and factors beyond the control of borrowers and mortgagees, HUD has determined that borrowers would benefit from
additional time to establish contact.  Therefore, HUD is reinstating and extending the period of time in which borrowers can notify mortgagees of their desire to develop a loss mitigation plan to May 30, 2006. 

Mortgagees should review any foreclosure initiated since March 31, 2006, in the hurricane-affected areas, for the continued possibility of loss mitigation relief provisions as referenced in recent hurricane-related mortgagee letters.

If, by May 30, 2006, a borrower provides a written commitment (defined in the Mortgagee Letter) to work with his or her mortgagee to develop and implement a plan to resolve the mortgage delinquency, the time to initiate foreclosure will automatically be extended an additional 30 days to June 30, 2006.

As originally outlined in ML 2006-05, on or before May 30,2006, mortgagees are to:

• Assess the status, condition, and habitability of the mortgaged property;
• Establish contact with borrowers and evaluate their short term and long term plans for housing, employment, home repairs, and repayment of the mortgage debt;
• Complete a determination of the borrower(s) hazard and flood insurance coverage, property damage, and available insurance recoveries;
• Confirm in writing that the borrower intends to work with the mortgagee to develop and implement a plan to repair or rebuild the home and resolve the mortgage delinquency.
  

The foreclosure moratorium will terminate on May 30, 2006, for all loans where the borrower has not made a written commitment.

In instances where a borrower fails to make a written request for additional time to resolve the default on or before the May 30, 2006, deadline, but subsequently notifies the mortgagee of his or her desire to retain homeownership, the mortgagee must fully evaluate the borrower's eligibility for all loss mitigation alternatives and implement the appropriate action.

To view the full Mortgagee Letter please click on the following link:

MORTGAGEE LETTER 2006-12 Foreclosure Moratorium Extensions to Assist Victims of Hurricanes Katrina, Rita, and Wilma