Recently, HUD revised HUD 4001.1 Single Family Housing Policy Handbook announced via FHA INFO #21-23, issued on April 19, 2021 (download here).  One of the most important changes for our USFN membership is HUD’s adoption of the Fannie Mae Allowable Foreclosure and Bankruptcy Attorney Fees Exhibits for all FHA investor loans.  

Specifically, HUD updated the Servicing and Loss Mitigation Sections III(A)(2)(t)(ii)(F)(2)(a), and (b) to provide:

a. Allowable Foreclosure Attorney Fees 

• Mortgagees may claim reimbursement from HUD for attorney fees related to routine foreclosure actions for the preferred method of foreclosure based on the Fannie Mae Allowable Foreclosure Attorney Fees Exhibit in the Fannie Mae Servicing Guide Exhibits & Resources. The amount claimed for attorney fees cannot exceed the actual fees charged for work performed. 

• Mortgagees may not request HUD approval to proceed with a method of foreclosure in states where an amount is not specified on the Fannie Mae Allowable Foreclosure Attorney Fees Exhibit. The footnotes included are not applicable to FHA-insured Mortgages. 

• Fannie Mae revises this Exhibit frequently, so Mortgagees must ensure the fees claimed for reimbursement are based on the Exhibit in effect as of the date foreclosure is initiated. HUD reserves the right to revise amounts which it considers reasonable and customary at any time. 

• Mortgagees may claim no more than 75 percent of the maximum attorney fee for fees incurred for a routine foreclosure that was not completed because any of the following occurred after the Mortgagee initiated foreclosure: 
  • the Borrower filed a bankruptcy petition; 
    
  • the Borrower successfully completed a Home Retention Option; 
  • the Borrower successfully completed a PFS; or 
  • the Borrower executed a DIL.

• Mortgagees may claim reimbursement from HUD for routine bankruptcy clearance actions based on the Fannie Mae Allowable Bankruptcy Attorney Fees Exhibit in the Fannie Mae Servicing Guide Exhibits & Resources. The amount claimed cannot exceed the actual fees charged for work performed. 

• Fannie Mae revises this Exhibit frequently, so Mortgagees must ensure the fees claimed for reimbursement are based on the Exhibit in effect as of the date foreclosure is initiated. HUD reserves the right to revise amounts which it considers reasonable and customary at any time. 

Links to the Fannie Mae Allowable Foreclosure and Bankruptcy Fees Exhibits are below:

Allowable Foreclosure Attorney Fees Exhibit (03/10/2021) (fanniemae.com)

Allowable Bankruptcy Attorney Fees Exhibit (09/11/2019) (fanniemae.com)

FHA INFO #21-23 indicates that HUD is allowing immediate implementation of these updates. The swift implementation of the changes is consistent with the FHA Fact Sheet which indicates “Mortgagees may begin to implement these updates to HUD’s policies immediately”. As you may be aware, HUD’s maximum fees were previously up to 40% below market rate.  HUD’s adoption of the Fannie Mae foreclosure and bankruptcy fees eliminates that discrepancy and allows continued alignment in the industry without additional rule making burden.

USFN urges our business partners to implement the fee changes immediately. At least one industry partner has committed to implementation by May 1, 2021. USFN also suggests attorney firms be allowed to submit a one-time invoice to bring milestone billing current to the rates applicable at the time of implementation. Allowing a one-time invoice on all HUD files, active and on hold (i.e. all files where no HUD claim has been submitted by the servicer), is consistent with the guidance from HUD (“Mortgagees must ensure the fees claimed for reimbursement are based on the Exhibit in effect as of the date foreclosure is initiated”).  

We will continue to keep you updated as events evolve.

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