www.hudclips.org 


U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

May 11, 1989
Mortgagee Letter 89-15
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  Title Insurance Coverage for Single Family Conveyed
          Properties
 
     This Mortgagee Letter rescinds and replaces Mortgagee
Letter 88-20 on the same subject.  Although there are no changes
in Method 1, we feel it will be more convenient for mortgagees to
remove Mortgagee Letter 88-20 and to replace it with this Mortgagee
Letter which contains a change in Method 2.
 
     When mortgagees tender to the Secretary of HUD a satisfactory
conveyance of title and transfer of possession of the property, the
instrument of conveyance must convey good marketable title to the
property and be accompanied by title evidence satisfactory to the
Secretary. (24 CFR 203.366).
 
     This letter provides mortgagees with instructions on the amount
of title insurance coverage necessary in all conveyances to the
Secretary.  When a title policy is submitted to show HUD with good
marketable title, the amount of title insurance coverage will be
determined by one of the two methods described below:
 
     Method 1.  Use of the Claims without Conveyance of Title (CWCOT)
 
     If the mortgagee uses the CWCOT procedure in the foreclosure
process, the amount of title insurance coverage should be obtained
from the appraised value of the property.  The mortgagee obtains this
amount from one of the following sources:
 
     a.   Form HUD-91022, Mortgagee Notice of Foreclosure Sale.  The
          amount of title insurance coverage will be equal to the
          amount contained in Part B line 5.  Mortgagees must be
          careful not to use the Commissioner's adjusted Fair Market
          Value found on line 7 of Part B.  Please refer to
          Mortgagee Letter 87-20 , Claims Without Conveyance of Title
          for further information on Fair Market Value.
 
     b.   If the mortgagee has not received the completed Part B of
          HUD-91022 from the local HUD office, it will use an amount
          equal to that contained in the latest FHA appraisal report
          ordered in conjunction with the CWCOT.
 
     c.   If the mortgagee was required to obtain an appraisal from
          the Sheriff's office according to State or local law, it
          will use the amount of that appraisal for the title
          insurance coverage.
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     d.   If no CWCOT appraisal report or copy thereof is
          available, the mortgagee must use Method 2 contained below
          to determine the amount of title insurance coverage.
 
     Method 2.  Where CWCOT was not used
 
     If the mortgagee did not use the claims without conveyance of
title procedures in the foreclosure process, or if it did, and no
CWCOT appraisal report or copy thereof is available to the
mortgagee, the amount of title insurance coverage must be equal to
the unpaid principal balance under the mortgage.  This amount will
also be used when a title is conveyed to HUD through a deed-in-lieu
of foreclosure.  Mortgagees may wish to alert their foreclosing
agents of this policy, since in the past the agents were instructed
to obtain title insurance policy in the amount of total approximate
reimbursement from HUD.  The unpaid principal balance will, of
course, be a smaller amount than total reimbursement.
 
     The above-stated title insurance coverage procedures are
effective 90 days after the date of this Mortgagee Letter.
 
     If you have any questions about this new procedure please
direct them to the local HUD Office which has jurisdiction over the
subject property.
 
                              Sincerely yours,
 
                              James E. Schoenberger
                              General Deputy Assistant Secretary
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