Officials at the Department of Housing and Urban Development are interested in extending many of the remote contingencies put in place to accommodate social distancing, but there are limits.
For example, HUD Deputy Secretary Brian Montgomery expects remote notarization will be used long-term, but given that the loans the Federal Housing Administration insures have higher loan-to-value ratios that make them sensitive to changes in property value, widespread use of desktop-only appraisals probably won't.
"For our market activities, electronic closings, notarizations, securitizations — these are all aspects of the business that are not going away," he said at a virtual event hosted by the Mortgage Bankers Association on Tuesday. "Perhaps the one thing that might be difficult for FHA with LTVs at 96.5% is whether we could ever totally accept desktop-only appraisals."
Home loans in the government-insured market, which HUD is a major player in, serve borrowers with relatively greater financial challenges than others. As a result, those mortgages have had higher rates of forbearance and delinquency amid the pandemic.
HUD Secretary Ben Carson said Tuesday that he’s optimistic about FHA borrowers' ability to recover due to the broad range of temporary measures governmental entities have put in place have put in place to stave off economic distress, but he is still keeping a close eye on loan performance and capital levels.
"We expect many of the COVID-19-related delinquencies to heal, in part due to the special COVID-19 home retention options. However, as prudent planning dictates, we will continue to monitor this situation closely," he said.
So that HUD can continue to ensure the FHA has sufficient capital, new analysis of possible risks to its insurance fund will be incorporated into its annual actuarial report next month, Montgomery said.
