Good news from the Government for a change. Yesterday, October 22, 2018, the Department of Housing and Urban Development (HUD) revised its requirements for lenders submitting Home Equity Conversion Mortgage (HECM) loans that have reached 98% of their maximum claim amounts. FHA-approved HECM servicers can now use more easily accessible supporting documentation to get their claims paid faster.
The new requirements were announced in FHA Mortgagee Letter 2018-08. The requirements became effective yesterday, but HUD will accept public comments for a period of 30 calendar days, if you have further suggestions for this beleaguered insurance program.
So what’s all the shouting about? To begin with, HUD will now accept alternative documentation to establish evidence of current hazard insurance. No more hazard insurance declaration pages. Servicers may now provide documentation from the hazard insurance provider so long as it includes pertinent information spelled out in ML 2018-08. In addition, it just got easier to provide evidence of the borrower’s death . While HUD will still accept a copy of the borrower’s death certificate, effective immediately, servicers may now submit an obituary or documentation from a health care institution (if unable to obtain a death certificate). That should speed up the filing process considerably.
The new mortgagee letter also adds a few new requirements. HUD clarified its rules regarding property taxes for assigned loans, stating that HUD considers taxes to be “current’ when taxes are paid prior to delinquency, as defined by local taxing authorities. HUD reminded servicers that it determines whether this eligibility requirement is met at the time of assignment, not at the point the assignment is requested. HUD also reminded servicers that any tax bill that becomes delinquent before recordation must be paid by the borrower for the HECM to be assigned. If repairs were required during origination and then evidenced by a rider to the mortgage, servicers need to show the repairs were completed when submitting an assignment insurance claim. HUD also clarified what information must be submitted to confirm that mobile homes are treated as real property under the laws of the state where the subject property is located.
Finally, ML 2018-08 clarifies that servicers must file a claim for insurance benefits within 60 calendar days of receiving Preliminary Title Approval. Failure to meet the 60-day deadline will result in HUD rescinding the Preliminary Title Approval. Thereafter, servicers will have to submit a new request for payment. HUD also added an additional item to the Compliance Package. Servicers will now have to provide a detailed explanation of all pre-Due and Payable corporate advances.
Overall, the new HUD changes to the HECM claim filing requirements will streamline the process, reduce servicers’ hassles and provide several convenient alternatives to getting claims paid sooner. All in all, welcome news for HECM servicers.