Lenders and servicers may soon have a deadline to file insurance claims with the Federal Housing Administration, after the FHA issued a proposal this week establishing a “clear timetable” for claim payments.
According to the FHA, many lenders and servicers delay filing FHA insurance claims, choosing to wait and file large numbers of claims together. The FHA said that the costs associated with the delayed claim filing, coupled with the large number of claims filed simultaneously, place a strain on the FHA’s resources.
Under the proposal, the FHA would require lenders and servicers to submit claims three months from the point they obtain a marketable title on the subject property or successfully sell the property to a third party.
According to FHA’s proposal, its current rules are “silent” when it comes to a deadline for when an insurance claim can be filed with the FHA.
The FHA also said that under the current system, the bundling of claims “negatively impacts” its ability to project the future state of the Mutual Mortgage Insurance Fund, as well as the FHA’s ability to fulfill its statutory obligations to safeguard the MMIF.
The FHA said that this new deadline will help ensure that it can effectively manage and process timely claims.
According to FHA data, the percentage of claims filed more than 180 days after a marketable title was obtained has risen from 4.88% of total claims in fiscal 2008 to 20.45% in 2014.
“Establishing a timeframe in which mortgagees must file FHA mortgage insurance claims will bring better predictability to FHA,” the FHA said in its proposed rule. “The ability to better project capitalization of the MMIF will lessen the likelihood of FHA needing to obtain a capital infusion to support the solvency of the MMIF.”
The FHA is also proposing the elimination of 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 now receive reimbursement for these expenses, subject to a deduction based on the number of days the foreclosure or claim filing deadline was past due.
According to the FHA, the reimbursement calculation will allow lenders and servicers to recover amounts they normally would have lost while mitigating the cost to the FHA associated with missed deadlines.
Comments on both proposals are due by Sept. 4.