FHA seeks to streamline HECM claim submissions

The Federal Housing Administration wants to reduce liquidity strain for mortgage servicers by proposing some modifications to its submission of claims requirements for Home Equity Conversion Mortgage (HECM) products. It also wants to revise deadlines for filing said claims.

Per a proposed mortgagee letter, the administration is seeking to update its HECM assignment claim type 22 submission criteria by lowering the maximum claim amount threshold to 97% from the 97.5% allowed today.

FHA said this change will expedite the payment of claim funds to mortgage servicers when the mortgage reaches 98% of maximum claim amount. The move is "in light of current market liquidity considerations," FHA said in its proposed draft published Tuesday. 

Feedback from the industry is due by April 11. 

The FHA is also suggesting that the deadline for delivering the original notes and mortgage to the FHA should happen within 90 days after the assignment claim payment date, which may eliminate delays for servicers and reduce the overall time frame from initial submission to claim payment.

Additionally, it is seeking to align the deadline for delivering recorded assignments of mortgages for all reverse mortgages by increasing the timeline to 12 months for HECMs with FHA case numbers assigned before September 19, 2017. Currently, the policy provides two different deadlines depending on the date of FHA case number assignments.

The revisions can improve efficiencies in the assignment process and lessen the amount of time that a servicer must hold a loan on their balance sheet, a blog published by the National Reverse Mortgage Lenders Association said.

Specifically, it may shorten the time between when "the loan is bought out of the Ginnie Mae HMBS pool and when the assignment is accepted by the Department of Housing and Urban Development," NRMLA's post said.

Proposed streamlining of the HECM program is likely welcome news to recent entrants into reverse mortgage lending space.

Fairway Independent Mortgage announced in early January that it is investing what it termed as "unprecedented resources" in its reverse mortgage business. Meanwhile, Guild Mortgage also moved to expand its footprint into reverse mortgage lending with the acquisition of Cherry Creek Mortgage, a long-time player in the reverse mortgage business.

Both mortgage lenders companies also have servicing portfolios.