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c. Calculation of Insurance Claim Payment (12/21/2022)
i. Reserve Account
Reserve Account refers to 10 percent of the amount disbursed, advanced, or expended by the Lender in originating or purchasing eligible Loans registered for insurance under Title I, less the amount of all insurance claims approved for payment in connection with losses on such Loans.
The claim payment is calculated as 90 percent of the valid claim amount, not to exceed the amount remaining in a Lender’s insurance reserve account.
A valid claim includes:
• the unpaid loan obligation;
• interest on the unpaid loan obligation;
• uncollected court costs;
• attorney’s fees;
• expenses for recording assignments; and
• the cost of force-placed Flood Insurance where required.
ii. Unpaid Amount of the Loan Obligation
(A) Definition
The Unpaid Amount of the Loan Obligation refers to the net unpaid principal and the uncollected interest earned to the date of Default, calculated according to the Actuarial Method.
Actuarial Method refers to the method of allocating payments made on a Loan between the outstanding balance of the principal amount borrowed and the interest due on a loan obligation, under which a payment is applied first to the accrued interest, and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the obligation.
(B) Standard
If the Lender obtained HUD’s prior approval to proceed against the loan security and later files a claim for any remaining loss, the unpaid amount of the Title I loan obligation must be reduced by the proceeds received from the Property’s sales or disposition, after deducting the following:
• the balances due on any obligations senior to the Title I obligation;
• customary and reasonable expenses for foreclosure and disposition, as determined by HUD;
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IV. CLAIMS AND DISPOSITION C. Title I Claims
1. Title I Claims for Property Improvement
• the interest on the unpaid amount of the loan obligation from the date of Default to the date of the claim’s initial submission for payment plus 15 Days, calculated at the rate of 7 percent per annum. Interest will not be paid for any period greater than nine months from the date of Default;
• uncollected court costs, including fees paid for issuing, serving, and filing a summons;
• attorney’s fees on an hourly or other basis for time actually expended and billed, not to exceed $500; and
• expenses for recording an assignment of security to the United States, if applicable.