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r. Denial of Insurance Claims (05/09/2022)
Effective for loan applications dated on or after June 1, 2009, when FHA endorses a Loan for insurance, the Loan is covered under the Lender’s Contract of Insurance. The insurance coverage for the Loan is incontestable from the date of issuance of the certificate of insurance except for fraud or misrepresentation on the part of the claimant in the origination.
Regardless of the loan application date, FHA may deny a claim in whole or in part, or within two years after paying a claim, and recover the claim payment based upon a violation of FHA’s requirements for claim submission. If the Note representing the Borrower’s obligation that is assigned to FHA is invalid or unenforceable, or if the Lender making the claim does not follow the FHA claim requirements under the insurance contract, FHA may deny payment of the claim.
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IV. CLAIMS AND DISPOSITION C. Title I Claims
2. Title I Claims for Manufactured Homes
i. Debt Not Valid or Enforceable
If the enforceability of the lien can be challenged, the Lender can obtain a Judgment against the Borrower and assign the Judgment to HUD. A lien may be challenged by improper wording of or method of mailing a legal notice, or other events that can challenge the validity of the deficiency debt. Acquiring a Judgment will prove the debt is valid.
ii. Missing or Incomplete Claim File Documentation
The claim package must include all applicable documents listed on form HUD-637. If claim documentation is missing or incomplete, the FOC may request the documents from the Lender.
iii. Claim Filing Past the Deadline
If a claim is filed after the claim filing deadline, the Lender must request a waiver to document that the late filing was unavoidable. Note that a servicing error by the Lender is not considered a valid basis for a waiver.
iv. Unresolved Borrower Complaint
A Borrower complaint that casts doubt on the enforceability of the loan Note must be resolved prior to filing a claim. The Lender may resubmit the claim with additional documentation regarding the resolution of the complaint or if the Lender obtains a Judgment against the Borrower. Obtaining a Judgment against the Borrower will prove the debt is valid and enforceable.
v. Note and/or Assignment Not an Original
The Lender may file a Missing Document Statement if it cannot locate the original Note and/or Assignment of Note.
vi. Error on the Appraisal Obtained in Connection with the Repossession of the
Manufactured Home
The Lender must address and resolve appraisal errors directly with the Appraiser. A claim may still be paid if errors are not resolved; however, HUD will adjust the claim payment amount.
Errors on the appraisal include, but are not limited to, a property description (including model) that does not match the invoice/sales contract, math error in value calculation, and/or a value of model options was incorrectly used or omitted.
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IV. CLAIMS AND DISPOSITION C. Title I Claims
2. Title I Claims for Manufactured Homes
vii. Missing or Incorrect Information on Form HUD-637, Title I Claim for Loss
The FOC will notify the Lender if a revised form HUD-637 is required due to missing or incorrect information. The revised form must be signed by an authorized official of the Lender prior to its resubmission to HUD.
viii. Missing or Incomplete Receipts for Repossession and Resale Expenses
HUD will adjust/lower claim amounts if a receipt used to substantiate a claimed amount is missing or unclear, unless the Lender can locate the receipt or clarify any information in question.