---
kind: "section"
citation: "24 C.F.R. § 1005.805"
title: "24"
number: "1005.805"
heading: "Effect of noncompliance."
url: "https://uscodex.org/cfr/24/1005.805"
---

# §1005.805. Effect of noncompliance.

- (a) When a claim case binder is submitted to HUD for consideration, HUD may conduct a post-endorsement review in accordance with [§ 1005.527](/cfr/24/1005.527.md). If HUD determines that the [Section 184](/cfr/24/184.md) Guaranteed Loan does not satisfy the requirements of subpart [D](/cfr/24/subpartD.md), [HUD](/cfr/24/subpartHUD.md) will take one or more of the following actions:
  - (1) **Reject the claim submission when the Holder is the Originating Direct Guarantee Lender.**
  - (2) Pay the claim to the current Holder and demand reimbursement of the claim from the Originating Direct Guarantee Lender.
  - (3) Reconvey the property or reassign the deed of trust or mortgage in accordance with [§ 1005.849](/cfr/24/1005.849.md).
  - (4) Pursue sanctions against the Originating Direct Guarantee Lender or Sponsored Entity pursuant to §§ [1005.905](/cfr/24/1005.905.md) and [1005.907](/cfr/24/1005.907.md).
- (b) **When reviewing a claim case binder, if HUD determines—**
  - (1) The Servicer failed to service the [Section 184](/cfr/24/184.md) Guaranteed Loan in accordance with [subpart G](/cfr/24/subpartG.md) of this part;
  - (2) The Servicer committed fraud or a material misrepresentation; or
  - (3) The Servicer had known or should have known of fraud or a material misrepresentation in violation of this part.
  - (4) HUD may take one or more of the following actions.
    - (i) Place a hold on processing the claim for reimbursement of eligible reasonable expenses under [§ 1005.807(b)](/cfr/24/1005.807.md?p=b) and provide the Servicer the opportunity to remedy the deficiency.
    - (ii) Reject the claim for reimbursement of eligible reasonable expenses under [§ 1005.807(b)](/cfr/24/1005.807.md?p=b) partially or in its entirety.
    - (iii) Reconvey the property or reassign the deed of trust or mortgage in accordance with [§ 1005.849](/cfr/24/1005.849.md), where applicable, and require the Holder to refund the claim payment of the unpaid principal balance under [§ 1005.807(a)](/cfr/24/1005.807.md?p=a) and expenses under [§ 1005.807(b)](/cfr/24/1005.807.md?p=b). The Holder may resubmit the claim when the deficiencies identified by HUD are cured.
    - (iv) **Pursue administrative offset for any unpaid amounts owed to HUD pursuant to 24 CFR part 17.**
    - (v) Pursue sanctions against the Servicer or Holder pursuant to §§ [1005.905](/cfr/24/1005.905.md) and [1005.907](/cfr/24/1005.907.md).
    - (vi) **Pursue other remedies as determined by HUD.**
- (c) If a property is reconveyed or the deed of trust or mortgage is reassigned to the Holder, the Holder may not be reimbursed for any expenses incurred after conveyance or reassignment.
- (d) If a claim is resubmitted after reconveyance or reassignment and HUD determines a decrease in the value of the property at the time of the resubmission, HUD may reduce the claim payment accordingly.

## Notes

### Authority

Authority: 12 U.S.C. 1715z-13a; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

### Source

Source: 89 FR 20056, Mar. 20, 2024; 89 FR 22084, Mar. 29, 2024, unless otherwise noted.