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FHA announces SFHA mortgagee requirements
On March 9, FHA announced FHA INFO 2022-25, which makes enhancements to FHA Connection (FHAC) and requires mortgagees to indicate if property improvements are in a Special Flood Hazard Area (SFHA) and provide applicable flood insurance data electronically if so. The enhancements implement new fields for the electronic submission of flood related data currently contained in FHA case binders. The electronic data collection will permit FHA to perform more data analytics on FHA-insured properties in flood zones. Mortgagees may submit additional flood-related data electronically for single family forward mortgages and Home Equity Conversion Mortgages on the corresponding Insurance Application Screens in FHAC, which include, among other things: (i) information regarding whether the property improvement is in a SFHA; (ii) indication of the existence of a final Letter of Map Amendment, final Letter of Map Revision, or a FEMA National Flood Insurance Program Elevation Certificate to verify that the property is not in a SFHA; and (iii) other details which may include flood insurance building coverage, flood insurance company, and the flood insurance policy number.
HUD announces Nebraska and Iowa disaster relief
On February 24, HUD announced disaster assistance for certain areas in Nebraska and Iowa impacted by severe storms, straight-line winds, and tornadoes on December 15, 2021. This follows President Biden’s major disaster declaration for certain counties on February 23. The disaster relief includes providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes. Flexibility measures for state and local governments, public housing authorities, tribes, and tribally designated house entities are also addressed.
HUD extends exclusive listing of REO properties
On January 13, HUD issued Mortgagee Letter 2022-01, which extends the Exclusive Listing Period during which Owner-Occupants, Governmental Entities, and HUD-approved non-profits are eligible to bid on HUD Real Estate Owned Properties from 15 days to 30 days. The mortgagee letter is effective March 1.
States say FHA must require servicers to comply with Covid-19 loss mitigation options
On December 21, a coalition of attorneys general from 20 states and the District of Columbia sent a letter to the FHA urging the agency to address mortgage servicers’ alleged failure to adequately implement Covid-19 recovery loss mitigation options for eligible borrowers. As previously covered by InfoBytes, FHA issued Mortgagee Letter 2021-18 in July, which required mortgage servicers to offer a zero-interest subordinate lien option to eligible homeowners who can resume their existing mortgage payments under the “COVID-19 Recovery Standalone Partial Claim” option. For borrowers that are unable to resume their monthly mortgage payments, FHA established the “COVID-19 Recovery Modification” option, which extended the term of a mortgage to 360 months at market rate and targeted a 25 percent principal and interest reduction for all eligible borrowers. At the time, FHA informed servicers that they could start offering the options as soon as operationally feasible but were required to use the new options within 90 days.
The AGs alleged in their letter that several servicers of FHA-insured loans are reportedly failing to adequately implement these Covid-19 relief programs, and are instead “routinely sending borrowers letters that fail to include the Covid-19 Recovery Modification as an available option, are requiring paperwork and imposing qualifications that are not necessary under the FHA’s guidelines, and are instructing borrowers during customer-service phone calls that this option does not exist.” The AGs expressed deep concerns over these reports and requested that FHA take immediate action to ensure that FHA’s loss mitigation options, including the Covid-19 Recovery Modification, are fully implemented, and that borrowers receive accurate, up-to-date information. The AGs asked that FHA-approved lenders and servicers be required to demonstrate that they are taking affirmative actions to implement these Covid-19 relief options and requested training for all customer service staff to ensure borrowers receive the necessary information.
FHA extends partial waiver of face-to-face borrower interviews
On December 2, FHA announced an extension to its temporary partial waiver of the face-to-face borrower interviews with borrowers as part of FHA’s early default intervention requirements under 24 C.F.R. § 203.604. The waiver was first published in March 2020 in response to the Covid-19 pandemic (covered by InfoBytes here). The temporary waiver, now effective through December 31, 2022, allows mortgagees to establish contact with borrowers by alternative methods, such as phone, email, or video calling services.
HUD issues 2022 mortgage and HECM limits
On November 30, HUD issued Mortgagee Letter 2021-28, which provides the 2022 nationwide forward mortgage limits. According to HUD, FHA calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act (NHA). Additionally, FHA sets these limits at or between the low-cost area and high-cost area limits based on the median house prices for the area and publishes the updated limits each calendar year. Among other things, HUD noted that the FHA national low-cost area mortgage limits are set at 65 percent of the national conforming limit of $647,200 for a one-unit property, and, for high-cost area mortgage limits, the FHA national high-cost area mortgage limits are set at 150 percent of the national conforming limit of $647,200 for a one-unit property. Forward mortgage limits for 2022 are effective for case numbers assigned on or after January 1, 2022.
The same day, HUD issued Mortgagee Letter 2021-29, which provides the 2022 home equity conversion mortgage (HECM) limits. According to the letter, the HECM maximum claim amount limits for traditional HECM, HECM for purchase, and HECM-to-HECM refinances are governed by the maximum claim amount limitation in the NHA. For the period of January 1, 2022, to December 31, 2022, the maximum claim amount for FHA-insured HECMs is $970,800 (150 percent of Freddie Mac’s national conforming limit of $647,200).
HUD updates appraisal fair housing compliance
On November 17, HUD issued Mortgagee Letter 2021-27, which provides updates on appraisal fair housing compliance and general appraiser requirements. According to HUD, the letter clarifies FHA’s existing requirements for appraisers and mortgagees on compliance with fair housing laws related to appraisal of properties that will serve as security for FHA-insured mortgages, and applies to all FHA Single Family Title II Forward and Reverse Mortgage Programs. Among other things, the changes include: (i) revising the Appraisers Post-Approval Requirements section to emphasize compliance with applicable laws, including the Fair Housing Act and all other federal, state, and local antidiscrimination laws; (ii) clarifying language in the Quality of Appraisal section to emphasize the requirement that mortgagees ensure the appraisal complies with applicable laws, including the Fair Housing Act and other federal, state, and local antidiscrimination laws; and (iii) restructuring a section of the General Appraiser Requirements into subsections, which clarifies guidance to the nondiscrimination policy and compliance with FHA guidelines and appraiser conduct. The mortgagee letter is effective immediately.
FHA proposes changes to defect taxonomy for loan servicing
On October 28, FHA requested stakeholder review and feedback on a draft update to Appendix 8.0 – FHA Defect Taxonomy for its Single Family Housing Policy Handbook 4000.1. The updated draft appendix includes, among other things, (i) six new defect areas to incorporate loan-level servicing reviews (servicer operations, account administration, delinquent and default servicing, loss mitigation processing, home retention, and home disposition); (ii) severity tier descriptions explaining the process used for determining whether defects require corrective servicing action or a different response “based on the impact of non-compliance on FHA, the property, or both”; and (iii) and expanded, servicing-specific remedies for violations. As previously covered by InfoBytes, FHA issued an update to Section III of the handbook, which streamlined many standard mortgage servicing operational requirements and incorporated FHA actions taken to support borrowers experiencing Covid-19-related financial hardships. The proposed defect taxonomy updates are intended to increase transparency into FHA’s servicing loan review process and provide clarity on how FHA will hold servicers accountable for loan-level compliance. Comments are due December 27.
FHA publishes draft HECM sections of handbook
On September 29, FHA requested stakeholder review and feedback on the draft Home Equity Conversion Mortgage (HECM) Origination through Servicing sections of its Single Family Housing Policy Handbook 4000.1. The new draft sections are a continuation of the agency’s move toward a consolidated, authoritative Handbook 4000.1, and contain revisions to policy language to improve clarity and consistency along with proposed new policies. FHA stated that once the final version is published, the HECM Origination through Servicing sections will conform to the new organizational structure of Handbook 4000.1 and will replace existing HECM guidance on: (i) origination through post-closing and endorsement; (ii) appraiser and property requirements; (iii) servicing and loss mitigation; and (iv) glossary and acronyms. Feedback on the draft sections (posted on the agency’s drafting table) are due by November 15.
HUD issues mortgagee letter on Covid-19 forbearance
On September 27, HUD issued Mortgagee Letter 2021-24, which extends and adds Covid-19 relief options for borrowers who are struggling with mortgage payments due to the pandemic and for senior homeowners with Home Equity Conversion Mortgages (HECM) who require assistance to stay in their homes. According to HUD, these actions are in response to the impact of the pandemic and “are part of FHA’s continuing evolution of its COVID-19 policies so that the right tools are in place to help borrowers.” FHA is now providing: (i) “up to six months of COVID-19 Forbearance for borrowers requesting an initial COVID-19 Forbearance or HECM Extension from their mortgage servicer between October 1, 2021, and the end of the COVID-19 National Emergency, and an additional six months if the COVID-19 Forbearance or HECM Extension is exhausted and expires before the end of the COVID-19 National Emergency”; and (ii) “up to six months of additional forbearance for borrowers who requested or will request an initial COVID-19 Forbearance or HECM Extension from their mortgage servicer between July 1, 2021, and September 30, 2021, allowing these borrowers up to a maximum of 12 months of COVID-19 Forbearance or HECM Extension.”