The Federal Housing Administration (FHA) recently proposed establishing a maximum time period for lenders to file insurance claims and to revise its policy on reimbursement of eligible expenses and debenture interest when foreclosure and claim filing deadlines are missed.
Since the economic downturn in the housing market, many servicers delayed filing claims for insurance benefits, opting to wait and file large numbers of claims with FHA at the same time. The costs associated with delayed claim filing and the large number of claims filed simultaneously strain FHA resources.
FHA’s proposal would require lenders to submit claims three months from the point at which they obtain marketable title to the property or successfully sell the property to a third party. This new deadline will ensure FHA can effectively manage and process timely claims.
FHA’s proposal would also eliminate the requirement that lenders/servicers forfeit reimbursement for eligible expenses and debenture interest after missing a foreclosure or claim filing deadline. Lenders/servicers now will receive this reimbursement, subject to a deduction based on the number of days the foreclosure or claim filing deadline was past due. This reimbursement calculation will allow lenders/servicers to recover amounts they normally would have lost while mitigating the cost to FHA associated with missed deadlines.
FHA’s proposed rule will be open for public comment for 60 days.
For more information, visit www.hud.gov.