Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Administration (FHA) will now enable HECM servicers to provide alternative supporting documentation when they assign FHA-insured reverse mortgages to the agency for claim payment.
The move is designed to minimize delays in claims processing, according to a statement from FHA.
“Streamlining the HECM claim payment process makes us more responsive to participating lenders and helps continue our effort to put the program on a more financially viable path,” said FHA Commissioner Brian Montgomery.
FHA detailed the revised requirements in a mortgagee letter dated October 22, 2018.
The mortgage letter includes the following changes:
•Servicers no longer need to submit a hazard insurance declaration page. Instead, HUD will accept a document from the hazard insurance provider on its letterhead with the insured’s name, property address, type of coverage and insurance policy number.
•HUD will accept alternative evidence of the borrower’s death. If a servicer is unable to obtain a copy of a death certificate, HUD will accept alternative evidence of the death for purposes of Claim Type 22 review, such as an obituary or documentation from a health care institution.
•Clarification of current taxes. The revised policy will now consider taxed current for purposes of CT-22 review when they are paid prior to delinquency as defined by the local taxing authority. Borrowers must pay tax bills that become delinquent before recording of the assignment.
•Evidence of completion of required repairs. Servicers must submit evidence that any required repairs have been completed when submitting a CT-22 request. Form HUD-920511 or successor form and supporting documents if applicable, should be provided by servicers as evidence of completion.
•Clarification regarding mobile home title. Services must submit evidence that a mobile home is treated as real property under the laws of the appropriate state, such as an appropriate document from the taxing authority.
•Servicers must file claims for insurance benefits within 60 calendar days from receiving preliminary title approval. Failing to do will result in a rescinding of the approval, and the servicer must submit a new CT-22 request.
•Servicers must include, as an additional item in the compliance package, a detailed explanation of all pre-due and payable corporate advances. This explanation must include the date of the disbursement, the expense that was paid and any information relating to repayment received.
Questions about the changes should be directed to HUD’s National Servicing Center at (877) 622-8525.
Mortgage processors or underwriters who want to provide feedback on the changes can do so for 30 days from the date of issuance. Send feedback to the FHA Resource Center at email@example.com.
This is the second significant change FHA has announced related to HECMs in the last month.
Earlier this month, the agency announced that servicers may have to provide a second property appraisal in certain scenarios.
FHA announced the policy recently to reduce what it calls “appraisal inflation” on reverse mortgages. The new policy went into effect for case numbers assigned on or after October 1, 2018 and will continue through September 30, 2019. FHA said in its announcement that it will periodically review this guidance and may renew the requirements beyond fiscal year 2019.
The reverse mortgage market has been in steady decline since the 2008 housing crisis. The industry peaked in fiscal year 2009, when nearly 115,000 HECMs were originated. In the latest fiscal year, less than 45,500 reverse mortgages were originated, the lowest number if 13 years.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.