HUD Overhauls CWCOT and REO Sale Policies: What Mortgage Executives Must Do by May 30

The U.S. Department of Housing and Urban Development (HUD) released Mortgagee Letter 2025-13 on April 28, 2025, making important changes to CWCOT and REO disposition policies. Effective for all properties listed on or after May 30, 2025, the guidance marks a major shift toward faster, market-driven liquidation strategies.

HUD’s move reverses prior prioritizing of nonprofits and owner-occupants, signaling a return to performance-based servicing and streamlined execution, in part because of de minimis participation by targeted parties. The numbers really are striking and you should check them out.

Key Changes Mortgage Leaders Must Track Include:

1. CWCOT Exclusive Sales Period Eliminated
The 30-day nonprofit/government/owner-occupant exclusivity under CWCOT is gone.  All buyers, including investors, may now bid during a new 60-day open sale period.

2. REO Exclusive Listing Periods Slashed
HUD is rolling back extended REO listing windows, including:

• 15 days for “insured” or “insured with escrow” properties

• 5 days for “uninsured” properties

3. Tighter CWCOT Claim Submission Requirements
Claim Type 06 submissions will include such requirements as:

• 30-day deadlines for HUD Form 27011 (Parts A & B)

• Document uploads via FHA Catalyst or P260

• New Delinquency/Default Status (DDS) codes for buyer type and disposition result

Strategic Implications for Mortgage Servicers

These changes reflect HUD’s shift from policy-driven intent to operational performance metrics.

Impacts include:

• Shorter liquidation timelines

• Less regulatory favoritism for nonprofits and government entities

• Increased access for investors, who really are doing the buying anyway

• Stricter compliance on documentation and reporting

Failing to adapt by May 30 could delay claims or jeopardize reimbursement.

 Bottom Line for the C-Suite

HUD is prioritizing efficiency and accountability over policy-driven resale strategies. Mortgage servicers must align quickly to avoid compliance gaps.

Action items:

• Review and revise REO and CWCOT playbooks

• Update internal systems for DDS coding and claim uploads

• Conduct training on new documentation protocols

Need Help Preparing?

The team at Garris Horn LLP is closely monitoring these changes and advising clients on implementing HUD’s new expectations.

Read Mortgagee Letter 2025-13 here.

Contact Troy Garris at troy@garrishorn.com for more information and prepare before the May 30 deadline.