Page 1296
m. Non-Monetary Default (12/21/2022)
By executing the deed of trust and Note for an FHA-insured Mortgage, the Borrower agrees to submit the monthly Mortgage Payment by the first of each month and to adhere to the uniform covenants listed in the deed of trust and Note. The following provides guidance associated with the Borrower’s failure to adhere to these covenants.
i. Definition
Non-Monetary Default is when the Borrower fails to perform obligations, other than making monthly payments, contained in the mortgage security instrument for a period of 30 Days.
ii. Mortgagee Cure
When the Non-Monetary Default may be cured or otherwise resolved by Mortgagee action without resorting to foreclosure action, the Mortgagee must advance and charge the Borrower all amounts due for servicing activities, as defined in the mortgage agreement, if:
• the Borrower fails to make required payments or charges;
• the Borrower fails to perform any other covenants and agreements contained in the security instrument; or
• there is a legal proceeding that may affect the Mortgagee’s rights in the Property.
iii. Hazard and Flood Insurance
If the Borrower fails to maintain adequate Hazard and/or Flood Insurance coverage when it is stated as an obligation in the Mortgage, the Mortgagee may advance funds or force- place insurance as follows.
(A) Mortgagee Advances
The Mortgagee may advance the funds to pay the renewal premiums. The Mortgagee must renew the same type of policy and the same coverage carried previously by the Borrower.
(B) Force-Placed Insurance
If Borrowers fail to renew the Hazard and/or Flood Insurance coverage when required, the Mortgagee may force-place Hazard and/or Flood Insurance where consistent with federal regulations. While the Mortgagee may, at its discretion, obtain
Page 1297
III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
2. Default Servicing
more coverage than is necessary to protect the Mortgagee’s interest, HUD limits its reimbursement of these premiums.
If the Mortgagee force-places a Private Flood Insurance (PFI) policy to satisfy the mandatory Flood Insurance purchase requirement, the PFI must meet the requirements for Flood Insurance.
iv. Taxes, Assessments, and Government or Municipal Charges
The Mortgagee may advance funds and charge the Borrower when the Borrower fails to pay taxes, assessments, water rates, and other governmental or municipal charges, fines, or impositions not included in the Borrower’s monthly Mortgage Payment.
v. Homeowners’ Association Fees
If the Borrower fails to pay HOA/Condominium Fees, the Mortgagee must take any action necessary to protect the first lien position of the FHA-insured Mortgage against foreclosure actions brought by a HOA/condominium or any other junior lien holder.
vi. Code Violations
If the Borrower fails to address a code violation notice from the municipality where the Property is located, the Mortgagee must perform activities necessary to preserve and protect the Property, as authorized under the security instruments. See Mortgagee Property Preservation and Protection Action.
vii. Demolition Orders
The Mortgagee must forward copies of all notices pertaining to demolition orders and hearings to HUD’s MCM immediately upon discovery.
The MCM will advise the Mortgagee as to whether to proceed with the demolition or to postpone the demolition until after conveyance to HUD.
viii. Due-on-Sale Clause
The Mortgagee must review the Mortgage’s legal documents to determine any covenant restrictions pertaining to assumption. See Assumptions for more information.