In recently issued Mortgagee Letter 2022-08, the FHA established an exclusive Post-Foreclosure Sales period for certain owner-occupant buyers, HUD-approved Nonprofits, and governmental entities. Although the provisions of the Mortgagee Letter may be implemented immediately, the provisions must be implemented for all Post-Foreclosure Sales associated with FHA-insured Mortgages scheduled to occur on or 90 days from May 5, 2022.
More specifically, if a foreclosed property secured by an FHA-insured mortgage does not sell to a third party at its foreclosure sale, the Mortgagee may pursue “Post-Foreclosure Sales Efforts.” If utilizing Post-Foreclosure Sales Efforts, the Mortgagee must list the property for an initial 30-day period exclusively for the following buyer types: owner-occupant buyers, HUD-approved Non-profits, and Governmental Entities. If the property does not sell during the exclusive 30-day period, then the Mortgagee must non-exclusively offer the property for sale to all third parties for 60 days. If the property does not sell through the Post-Foreclosure Sales Efforts, the Mortgagee must convey the Property to HUD within 30 days of the end of the post-foreclosure sales period.
The Mortgagee Letter also provides additional requirements for mortgagees’ third-party providers conducting these sales, including indicating that the property is being sold “as-is” and occupied, if applicable; and providing buyers the opportunity to conduct tests, surveys, etc., on the property and order search of title documents and other property-related records. Moreover, the third-party provider must provide the buyer at least 15 days after sales contract ratification to cancel the contract due to property condition and must allow the buyer to cancel due to title issues at least seven days prior to closing. In addition, the Mortgagee Letter requires mortgagees report the status codes that apply to a foreclosure sale and ensure that successful bidders meet the exclusivity requirements, when applicable, by providing screenshots of the website of HUD-approved Non-profits or signed statements from owner-occupant buyers and Governmental Entities.