The Federal Housing Administration (FHA) is seeking industry feedback on a proposed update to its Home Equity Conversion Mortgage (HECM) assignment claims eligibility policy.
Under current program requirements, mortgage servicers can assign a HECM to the U.S. Department of Housing and Urban Development (HUD) when it reaches 98% of the Maximum Claim Amount and there is an eligible borrower or non-borrowing spouse residing in the property. Once the mortgage is assigned to HUD and placed in HUD’s Secretary-held portfolio, FHA disburses claim funds to the mortgage servicer and assumes responsibility for servicing the mortgage. According to the FHA, the assignment option reduces costly servicing expenses and allows mortgage servicers to obtain proceeds faster than otherwise possible through other measures.
The new proposal would enable certain categories of due and payable HECMs that were previously ineligible for assignment to be assigned to HUD, enabling servicers to obtain earlier resolution of these loans through HUD’s assignment claims process. The FHA stated this change will support servicer liquidity and strengthen the HECM market for senior homeowners who use a HECM to age in place.
“Today’s proposal is the latest in the series of measures we’ve taken throughout this year to facilitate greater liquidity and stability in the HECM market,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Preserving HECM as an option for seniors who have financial needs but want to age in place is a high priority for FHA.”
FHA is seeking feedback on through its website, with a Dec. 11 deadline for input.
