Mortgagees may convey damaged properties without prior written approval if there is damage resulting from Mortgagor neglect and the damage was discovered and documented at the initial inspection. The mortgagee must include a description of the damage in the “Mortgagee‟s Comments” section of Form HUD-27011, Part A, and mark Item 24. “Is the property conveyed damaged?” “no”. (Note: marking “yes” in item 24, triggers HUD‟s claim system to look in item 26 for the date of HUD‟s approval to convey the property damaged and to item 27 for the amount that
the claim is to be reduced.)

For properties that were damaged while under the control of the mortgagee or as a result of mortgagee neglect, the mortgagee must obtain approval from the MCM to convey the damaged property to HUD. However, as a matter of administrative practice, HUD generally will not deny conveyance of properties if the Government‟s estimate of the cost to repair the damage attributable to the mortgagee is equal to or less than $2,500. The claim is generally reduced by that amount.