Good Neighbor Next Door Mortgages

The National Servicing Center (NSC) in Tulsa monitors the
servicing of Good Neighbor Next Door (GNND) loans after closing. The Good
Neighbor Sales program allows eligible full-time law enforcement officers,
teachers, and firefighters/emergency responders to participate.

When participants purchase properties under the GNND
program they agree to own and live in the property for a three-year period as
their sole residence. Participants are required to certify every year that they
are living in the property.

The annual certification is mailed to participants, ready
for signature, around the anniversary of the purchase. Participants should
sign, date, and return the form to the address specified in the letter. If they
fail to return the first letter, a follow-up letter is sent one month later. At
times, their return letter and the follow-up letter cross in the mail. If this
happens, participants can either contact the servicer to determine if the first
certification was received and logged in or they can sign and return the second
certification.

If participants fail to return at least one annual
certification per year, NSC refers the case for investigation. An investigator
will then make an on-site visit to verify the occupancy of the property.
Further, the investigator will ask the participant to sign the annual
certification in their presence. In the event that investigation fails to
verify occupancy, the participant will be turned over to the Office of
Inspector General for further investigation and possible prosecution.

When participants close on their home, they sign a note
and a mortgage. The mortgage is filed right after the first or primary
mortgage, making it a second mortgage. When participants pay off their first
mortgage which is usually done by refinancing, HUD’s mortgage moves into first
position. If a participant is attempting to refinance their first mortgage, the
lender will want its new loan to be in first position. In order to accomplish
this, HUD must be willing to subordinate its position to the new first
mortgage.

HUD has certain rules and procedures regarding
subordinating. The rules are that HUD will consent to refinancing:

(1) for
the purpose of obtaining an FHA 203(k) rehabilitation loan

(2) for
the purpose of obtaining a lower mortgage interest rate or change in the term
of the loan

(3) to prevent the participant from defaulting on the
first mortgage. The 203(k) loan is a rehabilitation loan in which necessary
property improvements are financed into a new loan.

At the end of the required three-year occupancy period,
HUD’s second mortgage will be released provided:

(1) the
participant has completed and returned the required annual certifications,

(2) is
not currently under investigation by the Office of Inspector General, and

(3) is in compliance with all GNND regulations.

A mortgage satisfaction will be filed with the
participant’s local county recorder’s office. After the release is filed, a
copy will be mailed to the property address. Thereafter, HUD’s second mortgage
will not show up on the title to your property. After release, there is no
further obligation to or restrictions imposed by the Department of Housing and
Urban Development. Releases are mailed to the county recorder for filing no
later than thirty days after the end of the required occupancy period. However,
some counties have a filing backlog, over which HUD has no control.

Leave a Reply