Bulletin: SLS2023020

Bulletins by State
Bulletins by Country

Bulletin: SLS2023020

Bulletin Document
V 4
Date: December 11, 2023
To: All Issuing Offices
RE: UNDERWRITING - Loan Modifications and Subsequent Sales by Borrowers / Homeowners

Dear Associates:

BACKROUND:

In 2008, the Emergency Economic Stabilization Act empowered the Department of the Treasury to seek the modification of certain troubled mortgage loans. This led to the creation of the Home Affordable Modification Program (HAMP). Since then, other government-backed modification programs, under varying names, have been made available to struggling borrowers, including programs developed in response to assist borrowers during the COVID-19 pandemic.

The goals of these programs include bringing monthly mortgage payments to an affordable level and foreclosure avoidance for homeowners. Many of these programs achieved these goals by deferring the payment of a sum of money owed by the borrower. This sum, sometimes called a Partial Claim, stops accruing interest for the borrower, but requires payment in full at the time of a sale or refinance. This deferred obligation, a/k/a Partial Claim, is referenced in the modification documents and may be secured by a second mortgage or deed of trust to the Secretary of Housing and Urban Development (HUD).

Given that these second mortgages or deeds of trust rarely require monthly payments, borrowers are sometimes unaware that because of the modification, there exists an additional encumbrance on their home. Further, some lenders identify Partial Claim mortgage loans with the same loan number as the primary or first mortgage loan.

The Company has experienced claim losses under its policies of title insurance due to the failure to identify the lien on title created by the modification, and consequently the failure to obtain a payoff and secure a discharge of the same.

GUIDANCE:

If your title search discloses a modification of an existing lien, the recorded modification document must be reviewed carefully and in its entirety to determine if the modification secures a mortgage or deed of trust to HUD or otherwise requires a payment to HUD.

If the modification references a Partial Claim or states that it is a mortgage or deed of trust granted to HUD, the issuing office must obtain payoff information from the Secretary-Held Mortgage Servicing Contractor. The issuing office must disburse in accordance with the payoff instructions and monitor the file for receipt of the release or discharge of mortgage or deed of trust or confirm that the release is recorded. The issuing office may not rely on information provided by the primary or first mortgagee that no payoff or additional funds are due as a result of the modification.

As of the date of this bulletin, the HUD mortgage servicing contractor for Partial Claim Mortgages is Information Systems & Networks Corporation (ISN) and payoffs can be requested through the following email: PCPayoffs@hud.gov

For more detailed information from HUD, please follow this link:  HUD NSC Secretary-Held Assets Servicing | HUD.gov / U.S. Department of Housing and Urban Development (HUD)  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.


References

Bulletins Replaced:
  • None
Related Bulletins:
Underwriting Manual:
  • None
Exceptions Manual:
  • None
Forms:
  • None