Reminder Guidance for FHA-Approved Mortgagees Regarding Claims Without Conveyance of Title Bidding Policy

Today, the Federal Housing Administration (FHA) is reminding mortgagees about its Claims Without Conveyance of Title (CWCOT) bidding policy. Rather than conveying the property and title to HUD after a foreclosure, the CWCOT program allows mortgagees to market the property through foreclosure sale or post-foreclosure sale to third parties. This reduces losses to FHA’s Mutual Mortgage Insurance Fund (MMIF) while expediting the return of foreclosed properties to the market and decreasing neighborhood blight.

The CWCOT program uses the Commissioner’s Adjusted Fair Market Value (CAFMV). The CAFMV represents HUD’s estimate of the property’s market value, adjusted by “haircuts” to account for expected expenses and risks related to resale, such as repair costs, marketing time, and local market conditions. HUD regularly refines adjustments to the CAFMV to more precisely estimate the value of foreclosed properties.

Under CWCOT, mortgagees are required to submit a foreclosure sale bid at either:

• the Commissioner’s Adjusted Fair Market Value (CAFMV), or

• the state-mandated foreclosure price, where applicable.

Mortgagees are required to use CAFMV at post-foreclosure sales opportunities, also known as “second chance” sales.It is important to note that the total outstanding borrower’s debt to the mortgagee is not equivalent to the CAFMV.

As stated in the FHA Single Family Housing Claim Filing Technical Guide, in their claim submission for CWCOT, mortgagees must include on Form HUD-27011 the greater of:

• the CAFMV;
• the foreclosure sale price (the actual amount of the winning bid at the foreclosure sale where the property was sold to the mortgagee or third party; not the net proceeds amount); or
• the redemption price (the actual redemption price figure, not the amount of redemption proceeds received by the mortgagee) in Item 108 Surplus funds can be claimed in Item 305.

FHA acknowledges that in some cases a mortgagee’s total debt may be lower than the CAFMV, which may require mortgagees to advance funds at the foreclosure sale. HUD believes, in many cases, improved CAFMV haircuts will help close this gap, thus reducing the mortgagee’s financial burden in these instances.

To further improve the accuracy and effectiveness of foreclosure sale bids under CWCOT, on July 17, 2025, FHA updated its haircut methodology by increasing the geographic granularity of the applied discounts. These changes are designed to better reflect local market conditions by providing more specific discounts for Metropolitan Statistical Areas (MSAs) instead of state-wide discounts, where sufficient data is available. FHA’s analysis shows that under its previous CAFMV haircuts, total debt was below CAFMV in approximately 37 percent of cases from January 2024 through March 2025. Under the enhanced, more granular geographic haircuts, FHA estimates the percentage will be reduced substantially to somewhere between 10 percent and 20 percent.

The updated haircut methodology will be effective for foreclosure sales and post-foreclosure sales efforts scheduled on or after September 15, 2025.

Additionally, FHA is actively working to incorporate more robust and refined data into its modeling and valuation processes to further improve its haircuts. This ongoing improvement aims to ensure that CAFMV estimates are as precise and closely aligned to the market as possible.

If you have questions or need additional information regarding HUD’s CWCOT Bidding Policy, contact the FHA Resource Center (referenced below).

Need Support? Contact the FHA Resource Center.

• Visit our knowledge base to obtain answers to frequently asked questions 24/7 at
  www.hud.gov/answers.
• E-mail answers@hud.gov. Emails and phone messages will be responded to during normal hours of operation, 8:00 AM to 8:00 PM (Eastern), Monday through Friday on all non-Federal holidays.
• Call 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at 1-800-877-8339.

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