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FHA seeks feedback on changing reconsideration of valuation requests
Recently, FHA published a draft mortgagee letter (ML) proposing policy changes to its requirements for processing and documenting reconsideration of valuation (ROV) requests, specifically when requests are initiated by a borrower for the review of appraisal results. According to the ML, FHA provided proposed guidance to improve the process when prospective borrowers applying for FHA-insured Title II forward or Home Equity Conversion Mortgages (HECM) request an ROV on a property if the initial valuation is lower than expected, or that there is indication of illegal bias, that Fair Housing regulations have been violated, or that there may be unlawful discrimination. The draft also proposed updated appraisal review standards, which are intended to provide mortgagees and appraisers with clarifying guidance on the quality of an appraisal report and the ROV process and responsibilities. Public comments are due by February 2.
FHA announces pandemic assistance on reverse mortgages
On December 15, FHA published Mortgagee Letter 2022-23, COVID-19 Home Equity Conversion Mortgage (HECM) Property Charge Repayment Plan, which provides requirements for a new property charge repayment plan option for senior homeowners with HECMs who have gotten behind on their property charge payments as a result of the Covid-19 pandemic. The eligibility policies of the new repayment plan include, among other things:
- Making the plan available to borrowers who have applied for Homeowner Assistance Fund (HAF) assistance, if the HAF funds combined with the borrower’s ability to repay will satisfy the servicer’s advances for the delinquent property charges;
- Permitting the Covid-19 HECM Repayment Plan regardless of whether the borrower has been unsuccessful on a prior repayment plan and whether the borrower owes over $5,000 in property charge advances; and
- Requiring a verbal attestation from the borrower that they have been impacted by Covid-19.
Additionally, borrowers may receive a repayment plan regardless of the dollar amount of property charge payments owed. Further, servicers can offer homeowners a repayment plan of up to five full years (60 months) regardless of whether a prior repayment plan has been used.
HUD increases FHA loan limits for 2023
On December 1, HUD announced the 2023 loan limits for Single Family Title II Forward and Home Equity Conversion Mortgage (HECM) insurance programs. (See also Mortgagee Letter 2022-20 and Mortgagee Letter 2022-21). For FHA case numbers assigned on or after January 1, 2023, the maximum loan limits for FHA forward mortgages will increase in 3,222 counties and remain unchanged in 12 counties. The HECM maximum claim amount will also increase from $970,800 to $1,089,300.
FHA extends temporary partial waivers for specific HECM policies
On November 28, FHA announced FHA INFO 2022-98 to extend two temporary partial waivers to its Home Equity Conversion Mortgage (HECM) loss mitigation policies for senior borrowers impacted by the Covid-19 pandemic who continue to experience significant financial difficulties. The first temporary partial waiver concerns Mortgagee Letter 2015-11. FHA notes that the waiver “allows mortgagees to offer repayment plans to HECM borrowers with unpaid property charges regardless of their total outstanding arrearage.” The second waiver—concerning Mortgagee Letter 2016-07—“permits mortgagees to seek assignment of a HECM immediately after using their own funds to pay property taxes and insurance on or after March 1, 2020, by temporarily eliminating the three-year waiting period for such assignments.” Both waivers were set to expire at the end of December, but are now effective through December 31, 2023.
HUD updates HECM program
On August 31, HUD issued Mortgagee Letter (ML) 2022-15, which updates the Home Equity Conversion Mortgage (HECM) program. The ML, among other things, modifies the requirements for mortgagees to provide notice to a borrower’s estate following an HECM becoming due and payable due to the death of the last surviving borrower. The ML may be implemented immediately but must be implemented no later than 90 days from the date of this ML for HECMs that become due and payable on or after the publication date of this ML. Additionally, comments are due within 30 days after the date of issuance.
FHA revises appraisal validity period
On July 12, FHA released FHA INFO 2022-71, announcing the publication of Mortgagee Letter (ML) 2022-11, Revised Appraisal Validity Periods, which applies to Single Family Title II Forward and HECM programs. The ML increases the FHA initial appraisal validity period from 120 days to 180 days and extends the appraisal update validity period to one year. As a result of the ML, FHA will implement modifications to the appraisal-related functionality in FHA Connection (FHAC). For all case numbers assigned on or after September 6, the Appraisal Effective Date field on the FHAC Appraisal Logging screen will no longer be editable. Appraisal Logging for this field is automatically pre-filled with the information submitted from the electronic appraisal report. The updates outlined in ML 2022- 11 will be incorporated under the Single-Family Housing Policy Handbook 4000.1.
FHA issues temporary partial waivers for specific HECM policies
On June 23, FHA announced FHA INFO 2022-64 to issue the following temporary partial waivers to its Home Equity Conversion Mortgage (HECM) policies for senior homeowners impacted by the Covid-19 pandemic who continue to experience significant financial difficulties. Specifically, the first temporary partial waiver concerns Mortgagee Letter 2015-11. FHA notes that its waiver “allows mortgagees to offer repayment plans to HECM borrowers with unpaid property charges regardless of their total outstanding arrearage." The second waiver—concerning Mortgagee Letter 2016-07—“permits mortgagees to seek assignment of a HECM immediately after using their own funds to pay property taxes and insurance on or after March 1, 2020, by temporarily eliminating the three-year waiting period for such assignments.” Both waivers are effective through December 31.
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 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).
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.