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m. Lender Responsibilities Pending Insurance Claim Payment (05/09/2022)
If an insurance claim is pending payment, the Lender must not pursue active collections against the Borrower, but must take all steps necessary to protect the interests of HUD and the Lender.
The Lender is responsible for keeping information current for a claim that has already been submitted, but not yet paid.
i. Legal Notices
The Lender is responsible for answering bankruptcy, foreclosure and other legal notices and forwarding the information to HUD.
ii. Borrower Payments
If a Borrower sends a payment while an insurance claim is pending, the Lender must accept it. The Lender then may either retain the payment and submit an amended form HUD-637, or hold the payment and forward it to the FOC after HUD pays the claim.
If a Lender opts not to submit an amended form HUD-637, the Lender may contact the FOC to advise that a payment is being held and request that processing of the claim be expedited so that the payment can be forwarded to the FOC.
iii. Release of Liability
The Lender must not release the Borrower or any co-maker or Co-signer from liability under the Note unless in connection with an assumption, or unless approved in advance by HUD. The Lender may seek approval from HUD by sending a written request to the FOC. The Lender’s submission to the FOC must include:
• information regarding the proposed release of liability;
• explanation as to why the Borrower is seeking release from liability;
• the Lender’s recommendation; and
• documentation that supports why HUD should approve the request.
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IV. CLAIMS AND DISPOSITION C. Title I Claims
2. Title I Claims for Manufactured Homes