Section 0775-01-.13 - DEFAULTS AND CLAIMS(1) DEFAULTS: A notice of default must be submitted to the Corporation on the appropriate THRC form within ten (10) days after the account is sixty (60) days in default as defined in Rule 0775-1-.02(8) hereof. Each thirty (30) days thereafter, the mortgagee shall submit a monthly default status report while the loan continues in default or until proceedings to acquire title have been initiated.(2) FORBEARANCE: The mortgagee shall advise the Corporation as to the possibility of loan modification agreements, recasting, or other methods of forbearance which may be appropriate. All efforts to rehabilitate a delinquent account shall be exhausted prior to commencing foreclosure action or accepting a voluntary conveyance of the deed in lieu of foreclosure. The Corporation shall be kept advised of such efforts and the results thereof and may, as its own discretion and after consultation with the mortgagee and mortgagor, provide interest assistance pursuant with T.C.A. 13-2211 and 13-2212 to assist in the reinstatement of the delinquent account. Generally, the Corporation will follow the mortgagee's recommendation. The Corporation may require the institution of foreclosure proceedings pursuant to T.C.A. 13-2204(15) at any time the account is a total of three (3) months in default.(3) FORECLOSURE: If all efforts to cure the default or to establish forbearance by means of loan modification, recasting, etc., fail, the mortgagee shall attempt to obtain a voluntary conveyance of the deed in lieu of foreclosure. "If such conveyance is not practicable, or where foreclosure action is recommended by the Corporation, the mortgagee may proceed with foreclosure action." The following requirements shall be complied with as conditions for submitting a claim to the Corporation: (a) The mortgagee shall conduct a title search prior to accepting a deed in lieu of foreclosure.(b) Prior to instituting foreclosure, the mortgagee shall notify the Corporation, in writing, that the alternative remedies to reinstate the account have been exhausted.(c) Once foreclosure proceedings have been instituted. the mortgage shall be diligently pursue such actions as are necessary to minimize costs and expenses.(d) Copies of all documents pertaining to the foreclosure proceedings, including pleadings and decrees, shall be forwarded to the Corporation.(e) The property shall be sold free from dower, homestead, and the equity of redemption.(f) Pursuant to T.C.A. Section 13-2204(14),(15),(16), the Corporation shall be kept advised of all other matters with regard to obtaining a clear and unencumbered title including settlement with mortgagor, the form of deed, grantee in deed, appointment of receiver, and third party bidders.(g) When a clear and unencumbered title has been acquired, written notice shall be given to the Corporation.(4) CLAIMS: (a) Claim period: The insured mortgagee is required to file a claim for loss on the appropriate THRC form within a sixty (60) day period. If title is acquired by voluntary conveyance, the sixty (60) day period begins when mortgagor executes deed in lieu of foreclosure. If foreclosure is used the sixty (60) day period begins upon expiration of any redemption rights or, if none, as of the date of trustee's sale. Failure to file a claim for loss within the sixty (60) day period constitutes a waiver of any right to claim payment under the pertinent contract of THRC mortgage insurance.(b) Computation of loss: For purposes of computing the loss of the insured mortgagee pursuant to the subject insured mortgage and thereby establishing the basis for a claim, the mortgagee shall certify to the following:1. The unpaid principal balance due.2. Mortgage interest due (i.e., in arrears) as of the date of title acquisition.3. Attorney's fees charged in acquisition of title. Such fees shall not exceed a percentage of the total principal balance due. Said percentage shall be established in the Rules of Practice.4. Property taxes actually due and payable or paid by the mortgagee since the of the initial notice of default.5. Hazard insurance premium necessarily advanced by the mortgagee.6. Expenses ordinary and necessary to the preservation and maintenance of the subject property, as approved by the Corporation.7. Other expenses ordinary and necessary to acquisition of title, including costs, as approved by the Corporation.8. All amounts received by the mortgagee on account of the mortgage after the institution of foreclosure proceedings or the acquisition of the mortgaged property by direct conveyance or otherwise by default.9. All amounts received by the mortgagee from any source relating to the mortgaged property on account of rent or other income after deducting reasonable expenses incurred in handling the mortgaged property.10. All cash retained by the mortgagee, including amounts held or deposited for the account of the mortgagor or to which he is entitled under the mortgage transaction that have not been applied in reduction of the mortgage indebtedness.(c) Exhibits: The Corporation shall require, as set forth in its Rules of Practice, exhibits to be submitted as a part of any claim. Such exhibits may include evidence of title, mortgage transaction history, receipts for all disbursements and income, most recently paid tax bills, and receivers account if a receiver was appointed during foreclosure proceedings.(5) EXCLUDED HAZARDS OR RISKS: THRC mortgage insurance coverage does not protect from loss due to casualty or title risk. Expenses incurred for property repair resulting from such causes, accidental or otherwise, as negligence, flood, fire, termites, vandalism, defective or incomplete construction, etc. are not eligible for claim computation as distinguished from expenses incurred in the preservation and normal maintenance of the property.(6) METHODS OF SETTLEMENT: At the sole option of the Corporation, settlement of claims will be made through one of the following three (3) methods: (a) Acquisition settlement: Pay the claim as approved by the Corporation and in return, take merchantable title to the property in the name of the Corporation.(b) Direct loss settlement: The amount of reimbursement to the insured mortgagee will be determined by subtracting the net proceeds of the sale of the subject property from the approved claim, (prior approval by the Corporation is required before property resale for reimbursement under direct loss settlement).(c) Declared percentage settlement: Pay the percentage of the approved claim declared in the subject THRC mortgage insurance certificate covering the subject mortgage with the title being vested in the mortgagee.(7) PAYMENT OF CLAIM: The Corporation shall pay the claim on the basis of the optional settlement method chosen by the Corporation, within sixty (60) days after the claim has been properly filed and all conditions of the claim procedure complied with. In no event shall a claim paid under options .13(6)(b) and (c) exceed the declared percentage of the insured mortgage balance as of the date said insurance certificate was issued. insurance premiums paid shall be fully earned upon settlement of a claim and no refund shall be made.(8) SUBROGATION: If the Corporation, pursuant to the terms and conditions of a contract of mortgage insurance, or of a commitment to insure, makes any payment upon a defaulted loan to the mortgagee thereof, the Corporation shall be subrogated to all rights of the mortgagee.Tenn. Comp. R. & Regs. 0775-01-.13
. Rule filed October 10, 1975; effective November 10, 1975. Amended: filed April 30, 1976, effective July 14, 1976.Authority: T.C.A. Section 13-2204(4).