Sec. 05.06.06.10. Default Procedures

A. Notice of Delinquency. Notice of delinquency shall be submitted by a lender or its servicing agent to the Fund in writing within:

(1) 45 days if the first payment due under the loan is not paid when due; or

(2) 10 days after the account is in default for 60 days.

B. Actions by Lender.

(1) General.

(a) The Fund may require a lender to take any of the actions described in Regulation .10 of this chapter in connection with a defaulted or delinquent mortgage.

(b) The right of the Fund to pursue a borrower for deficiency or loss exists in every case to the extent allowed by law, and may be enforced at the discretion of the Fund.

(2) Cure. A lender shall make all reasonable efforts to cure a default before recommending foreclosure action or acceptance of a deed in lieu of foreclosure or assignment of the mortgage or mortgage modification.

(3) Forbearance.

(a) A lender may not engage in any action or agreement of forbearance without obtaining prior written approval from the Fund, except for actions or agreements that:

(i) Deal with delinquencies of 3 months or less; or

(ii) Provide for the loan to be brought current within 6 months.

(b) Any action of forbearance by a lender which impairs the mortgage that is not approved as described in this section or in writing by the Fund may terminate insurance coverage.

(4) Mortgage Modification. A lender shall advise the Fund in writing as to the advisability of entering into a mortgage modification agreement, a recasting of the mortgage, or methods of forbearance which the lender believes to be appropriate before pursuing further foreclosure measures.

(5) Deed in Lieu of Foreclosure.

(a) If all of a lender's efforts to bring the delinquent loan current fail, the lender shall recommend attempting to obtain a voluntary conveyance by means of a deed in lieu of foreclosure.

(b) If the Fund authorizes conveyance by a deed in lieu of foreclosure, it shall be on condition of conveyance by clear and marketable title.

(6) Foreclosure.

(a) If all efforts to cure the delinquency or to establish forbearance procedures or obtain a deed in lieu of foreclosure fail, the lender shall recommend foreclosure.

(b) Foreclosure proceedings may not be initiated by the lender without written approval of the Fund, except as may be provided in the Fund's servicing manual.

(c) A lender shall notify the Fund in writing within 5 working days after:

(i) A foreclosure sale; or

(ii) Acquisition of title to the property by deed in lieu of foreclosure.

(7) Mortgage Assignment. Notwithstanding §B(1)-----(6) of this regulation, the Fund may require a lender at any time to assign a delinquent mortgage to the Fund and file a claim in the full amount of the insurance.