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k. Sale of the Repossessed Home (05/09/2022)
The Manufactured Home must be sold to a third party and the sale must be evidenced by a sales contract. The Manufactured Home must be sold in a commercially acceptable manner, including all legally required notifications to the Borrower(s).
i. Best Price Obtainable
When the Lender obtains title to the Property securing a Manufactured Home Loan through repossession or foreclosure, the Property must be sold for the best price obtainable before submitting an insurance claim.
(A) Definition
The Best Price Obtainable refers to the greater of:
• the actual sales price of the Property, after deducting the cost of
o repairs to make the home habitable,
o cleaning and reconditioning,
o upgrades to the home requested by a buyer,
o making home furnishings, and equipment needed to make the Property
marketable, and
o transportation, set-up, and anchoring if the Manufactured Home is moved
to a new home site; or
• the appraised value of the Property before repairs (as determined by a HUD- approved appraisal obtained in accordance with Appraiser and Property Requirements for Title I Loans.
(B) Standard
A Lender’s objective in selling the Manufactured Home is to obtain the maximum net return in order to minimize the loss to HUD and to the Lender, and to minimize the deficiency amount that will be owed by the Borrower. The Lender should attempt to sell the home for a net sales price of no less than the retail appraised value of the home. A Lender may sell a home for less than the retail appraised value, but HUD’s calculation of the insurance claim payment will be based on the best price obtainable.
ii. Cost to Make the Manufactured Home Marketable
Any expense paid to a third party to facilitate a sale by making the home marketable must be documented in the case binder. A receipt must be legible and detailed to identify the unit, Borrower, date, amount, purpose, and parties involved in the transaction. Items may include the cost of repairs, furnishings, transportation, and set-up. Any expense dated after the resale date will not be eligible for eventual insurance claim reimbursement.
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IV. CLAIMS AND DISPOSITION D. Title I Disposition
2. Property Disposition of Manufactured Homes
iii. Extra Items Sold with the Repossessed Manufactured Home
If a Lender sells an extra item in addition to the repossessed Manufactured Home to induce the sale, the extra item must be itemized on the sales contract and a value provided. This will allow the deduction of the item (i.e., a new washer and dryer, when none existed before) from the sales price to arrive at the sale value of the repossessed Manufactured Home for the purpose of claim calculation.
iv. Sales Commission
The amount of a sales commission paid to a third party must be documented in the case binder. Determination of whether the Manufactured Home was sold on- or off-site must be part of the documentation. Note that HUD limits the amount of Sales Commission that can be included in its calculation of the Lender’s claim payment.
v. Enforceable Note
The Lender must service the Loan in a manner that will preserve a post-repossession resale deficiency, where state law allows. If necessary, a Lender may obtain a Judgment against the Borrower to establish enforceability.
vi. Lender Responsibility While Insurance Claim is Pending
If an insurance claim is pending payment, a Lender must not pursue active collections against the Borrower, but should take all steps necessary to protect the interests of HUD and the Lender.
vii. Legal Notices
The Lender is responsible for answering legal notices (e.g., bankruptcy) and forwarding the information to the FOC.
viii. Borrower Payment before Claim Payment
If a Borrower sends a payment while an insurance claim is pending, the Lender may either amend its form HUD-637, Title I Claim for Loss, or request that claim payment be expedited so that the payment can be forwarded to HUD.
ix. Prohibition against Coinsurance Recovery
The Lender must not attempt to collect money from the Borrower, including the coinsurance loss, after a claim is paid. Since the loan Note is assigned to the United States, the Lender has no basis from which to make demand upon a Borrower.
x. Borrower Payment after Claim Payment
All payments received by a Lender after claim payment must be promptly transmitted to the FOC.
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V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees
1. Quality Control Program Overview