HUD has released Mortgagee Letter 2006-18 providing additional instructions regarding properties located in areas affected by the trio of hurricanes that devastated the Gulf Coast in 2005.

With this Mortgagee Letter HUD provides a limited extension of the foreclosure moratorium provided by ML 2006-12. 

Some Mississippi and Louisiana borrowers whose properties were moderately or severely damaged by the hurricanes may be eligible for Community Development Block Grant (CDBG) funds , but have not yet had the opportunity to apply for and receive funds.  These grant funds would allow mortgagors to rebuild their homes or, if rebuilding is not feasible, preserve good credit standing by paying off their mortgage debt.

Therefore, for borrowers who may be eligible to apply for the aforementioned assistance, HUD is extending the foreclosure moratorium to August 31, 2006.

To qualify for this extension, the following criteria must be met:

• In Mississippi, eligible properties are restricted at this time to those located in Hancock, Harrison, Jackson or Pearl River Counties. Additional information for the Mississippi program is available by clicking here.
• In Louisiana, eligible properties are those located in any parish designated by FEMA as eligible for Individual Assistance.
• The borrower's mortgaged property must have sustained more than $5,000
  in hurricane related home damage.
• On or before June 30, 2006, the borrower must have made a written commitment to work with his or her mortgagee to develop and implement a plan to resolve the mortgage delinquency as described in ML 2006-12.

For mortgages that are no longer covered by a foreclosure moratorium, mortgagees must review each case to confirm that the borrower is not eligible for any of FHA's loss mitigation options prior to initiating foreclosure. 

In addition to the available FHA loss mitigation options, HUD announced in ML 2005-46, an expanded use of partial claims and loan modifications in cases where borrowers are committed to continued occupancy of the property.  HUD urges mortgagees to use those special loss mitigation authorities in impacted areas approved for individual disaster assistance to the maximum extent possible under FHA guidelines.

HUD reminds mortgagees that in accordance with HUD regulation 24 CFR 203.355, they must commence foreclosure or take one of the other options provided by the regulation within the greater of 6 months from the date of default or 90 days from the expiration of action that barred foreclosure.  In this case, the limited extension of the foreclosure moratorium is deemed to be HUD’s approval to a delay in initiating foreclosure under this regulation. 

If further time is needed to take an appropriate action, a mortgagee may request an extension of time by faxing a completed Form HUD-50012 to the National Servicing Center (NSC) at (918) 292-8992 that states the basis for the request and the applicable federal disaster. 

The Department continues to encourage mortgagees and their servicers not to report delinquencies on loans in the Presidentially-declared disaster areas to credit reporting agencies until and unless a mortgage is referred to foreclosure.  However, mortgagees must report all 90-day delinquencies to HUD's Single Family Default Monitoring System (SFDMS) using FHA Connection or Electronic Default Interchange (EDI).  Reporting delinquency data for accounts that are 30 days delinquent does not begin until data for the October 2006 reporting cycle is due to HUD, which is,  between November 1, 2006 and November 7, 2006. Additional guidance is available in ML 2006-15.

Any questions concerning this Mortgagee Letter are to be directed to the National Servicing Center at 888-297-8685.

To view the Mortgagee Letter, please click on the following link.

HUD ML 2006-18 Foreclosure Moratorium Extensions