ML 2009-05: Project Liveline Initiative's Impact on FHA's Foreclosure Time Frames (1/16/09)

TO:	ALL APPROVED MORTGAGEES
ATTENTION:	SINGLE FAMILY SERVICING MANAGERS

High foreclosure rates continue to have devastating effects on families and neighborhoods. The Federal Housing Administration (FHA) remains committed to taking actions to help families avoid foreclosure. Throughout the industry, mortgagees are participating in various initiatives to assist defaulting mortgagors avoid foreclosure and save their homes.

Included in the various foreclosure avoidance initiatives is the Project Lifeline Initiative. In February 2008, mortgage servicing members of the HOPE NOW Alliance announced an outreach strategy called Project Lifeline targeted at seriously delinquent homeowners (90 days or more past due) and who have not had any meaningful contact with their servicing mortgagee. The mortgagees had not been able to confirm the reason for the default, establish if the problem causing the default was temporary or long term or confirm if the mortgagor planned to retain ownership of the property. Under Project Lifeline, mortgagees will send letters monthly to these borrowers offering to pause, either initiation or continuation of foreclosure for 30 days.

The additional time required to take such actions could possibly impact on a mortgagee's ability to meet FHA foreclosure time frames. For most mortgagees this delay impacts either the time frame for initiation of foreclosure (24 CFR 203.355), or the time frame for "reasonable diligence" (24 CFR 203.356).

In the event the borrower does not qualify for loss mitigation and the loan terminates in foreclosure, HUD will allow a thirty day extension of the relevant time frame (initiation of foreclosure or reasonable diligence) for participation in the Project Lifeline Initiative, subject to the following conditions:

1.	The mortgagee has established a comprehensive, targeted program of direct mail to seriously delinquent borrowers, which program has defined start and stop dates.

2.	The mortgagee sent a special mailing (i.e., one not required under any other provision of servicing or foreclosure procedure) within the parameters of its program to a borrower:
	•	Whose loan is at least 90 days past due;
	•	Who currently occupies the mortgaged premises and has not expressed a desire to give up the property;
	•	With whom there has been no significant prior contact and;
	•	Who is not scheduled for foreclosure sale within the next 30 days.

3.	The borrower responded to the mailing and provided sufficient financial information for the servicer to explore an appropriate solution to the delinquency.

4.	The mortgagee completed a loss mitigation evaluation and reported the outcome to the borrower but was unable to offer loss mitigation, delinquent refinance or other workout option.

5.	The servicing file clearly documents that initiation or continuation of foreclosure was paused for up to 30 days to accommodate the evaluation.

Mortgagees who are not members of the HOPE NOW Alliance but choose to implement a comprehensive outreach campaign with characteristics similar to those described above will also be allowed the thirty day extension in accord with the required efforts made on behalf of their borrowers. They must maintain written documentation describing the parameters of their direct mail outreach and letters must be sent to all borrowers who meet the target criteria. Foreclosure delays resulting from outreach to individual borrowers who are not part of a targeted, direct mail campaign do not qualify for the thirty-day extension.

Mortgagees who are claiming the extension of time to initiate foreclosure must include the date that the thirty-day extension will expire in item 19 and must note "Project Lifeline" in the Mortgagee Comments section of Form HUD-27011, Single Family Application for Insurance Benefits. Mortgagees claiming the reasonable diligence extension must ensure their claim review files include documentation to fully support the Project Lifeline delay and must also note "Project Lifeline" in the Mortgagee Comments section of Form HUD-27011, Single Family Application for Insurance Benefits.

These Project Lifeline extension approvals are consistent with the emergency nature of the Project Lifeline Initiative and will be effective for loans that were 90 or more days delinquent on February 12, 2008, and will be extended to eligible claims received by FHA on or before December 31, 2009, or such earlier time as may be announced by the Department through a subsequent Mortgagee Letter.

Any questions regarding this Mortgagee Letter may be directed to HUD's National Servicing Center at (888) 297-8685 or hsg-lossmit@hud.gov. Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

The clarifications in this Mortgagee Letter are effective immediately.

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing –
Federal Housing Commissioner