The Federal Housing Administration (FHA) has proposed 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.
Servicers delaying filing claims for insurance benefits, opting to wait and filing large numbers of claims with the FHA at the same time has been a problem since the housing bubble burst in 2008. The costs associated with these delayed filings and the large numbers of claims that have been filed simultaneously have strained the FHA resources, leading to the proposal.
The proposal would create a deadline requiring lenders to submit claims three months from the point at which they obtain marketable title of a property or when they successfully sell the property to a third party. The FHA hopes that this will ensure that the agency can effectively manage and process timely claims.
Additionally, the FHA’s proposal would eliminate the requirement that lenders and servicers forfeit reimbursement for eligible expenses and debenture interest after missing a foreclosure or claim filing deadline. Under the proposal, lenders and servicers will receive the reimbursement, subject to a deduction based on the number of days the foreclosure or claim filing deadline was past due. The calculation for the reimbursement will allow lenders and servicers to recover amounts they normally would have loss while mitigating the cost to FHA associated with missed deadlines.
The proposed rule will be open for public comment until Sept. 4, after which the FHA will issue a final rule. Comments can be posted here.