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Delayed Filing of Part B of the Claim
LoanCare did not always file the part B portion of its conveyance claim within the required
timeframe. HUD Handbook 4330.4, paragraph 2-2(H), states that the servicer must submit part
B of form HUD-27011 to FHA within 45 days of the date the deed is filed for record or submit it
within 15 calendar days of the approval letter received date, whichever is later. LoanCare filed
part B of the conveyance claim for two of the loans reviewed between 51 and 55 days after the
deed was recorded or approval letter received date. It did not file part B for three additional
properties, instead transferring them to a new master subservicer after the 45 days had passed.
Delayed Remittance of Funds
LoanCare did not always remit FHA claim funds to Ginnie Mae on time. Its contract with
Ginnie Mae required it to remit all claim funds received by the second business day following
receipt of the funds. LoanCare did not meet this requirement for four of the five loans reviewed,
remitting funds on the third to fifth business days.
Misunderstood Requirements for Delays
LoanCare believed that the delays were justified and beyond its control, and it did not understand
that such delays were allowable only if it received an extension from FHA. During the audit,
LoanCare noted that the delays in conveying the properties and filing claims were justified and
beyond its control because in many cases, the properties needed repairs before they would be in
conveyance condition and also the records needed to file the claims were often difficult to obtain.
LoanCare had inherited these loans from defaulted issuers so it had not been responsible for the
loans during all of the servicing. In several cases, property condition issues prevented timely
conveyance. However, these reasons did not fully account for the delays and in several cases,
damages or title defects occurred after the conveyance deadline. For example, in one case,
LoanCare identified roof damage 14 days after it took possession of the property but failed to
convey it for a full year. LoanCare did not understand that to exceed the established timeframes,
it needed to request and receive an extension of time from FHA. It did not request an extension
for any of the sampled items as it believed that once the prior servicer had missed the initial
deadline to file for foreclosure, an extension request was not necessary since interest was already
being curtailed. However, HUD Handbook 4330.4, section 2-3, states that if the servicer cannot
comply with the time requirements for a particular action because of circumstances beyond its
control, it should submit a form HUD-50012 to FHA to request an extension of time.
Financial Impact
As a result of LoanCare’s noncompliance, the FHA fund was subjected to additional costs, and
Ginnie Mae was unable to recover its costs on time.
The delays in conveyance caused the FHA insurance fund to pay out more claim funds for
property preservation costs, such as lawn maintenance, repairs, and inspections, as well as hazard
insurance costs and property taxes.
Also, Ginnie Mae advanced funds to LoanCare to reimburse it for property preservation costs
and the costs of eviction and repairs. When LoanCare did not convey the properties to FHA
promptly, Ginnie Mae had to continue advancing funds for property preservation costs during the
delay. Further, the delays in filing the part B claims and remitting claim funds to Ginnie Mae
resulted in Ginnie Mae’s carrying these costs longer than necessary before receiving