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FHA finalizes rule for modernization of engagement with mortgagors in default
On August 2, the FHA finalized a rule allowing mortgagees to communicate with borrowers in default remotely, rather than in-person which was previously required, citing positive feedback after waivers of the in-person requirement were issued during the Covid-19 pandemic. According to the FHA, in an effort to modernize its practice, the final rule allows for the use of electronic and other remote methods of communication to satisfy HUD’s requirement to meet with a borrower who is in default, while preserving consumer protections. However, the rule also eliminates certain exceptions to the meeting requirements, including in situations where the borrower did not reside in the mortgage property and where the mortgaged property was not within 200 miles of the mortgagee’s offices, servicers, or branches. The final rule is effective on January 1, 2025.
FHA also noted it will soon post a draft of the Mortgagee Letter that will implement the provisions of the rule on the Single Family Housing Drafting Table for stakeholder feedback.
Virginia amends its foreclosure procedures and requires an affidavit
Recently, the Governor of Virginia signed HB 184 (the “Act”) which amended the foreclosure procedures and subordinate procedures. Specifically, the Act added a requirement that if the proposed sale was initiated due to a default in payment under a security instrument, then the subordinate mortgage lienholder must submit to the trustee an affidavit affirming that monthly statements were sent to the property owner detailing any interest, fees, or charges assessed. The amendments also provided that the subordinate mortgage lienholder must provide a copy of such affidavit to the person who would pay the instrument with written notice for a request for sale. That notice must advise the person to pay the instrument if the person believed that fees or interest were assessed in error. If the court would agree, then the person will be entitled to recover attorney fees and costs against the subordinated mortgage lienholder after the date of the foreclosure sale. The Act also added a provision that any purchaser at a foreclosure sale provide certification that the purchase will pay off any priority security instrument no later than 90 days from the date that the trustee's deed conveying the property would be recorded in the land records. The Act will go into effect on July 1.
NYDFS issues guidance on mortgage registration fees
On September 1, NYDFS issued guidance to regulated mortgage lenders and servicers clarifying that mortgagees cannot charge registration fees imposed by municipalities when a mortgage defaults to mortgagors’ accounts. The guidance reminds mortgagees that the state’s mortgage servicing regulation, 3 NYCRR Part 419, allows mortgagees to collect only certain types of fees from a mortgagor, consisting of “attorney’s fees, late and delinquency fees, property valuation fees, and fees for services actually rendered to a mortgagor when such fees are reasonably related to the cost of rendering the service to the borrower.” NYDFS asserts that municipality-required default registration fees do not fall under the specified list and therefore cannot be charged to a mortgagor. The guidance instructs mortgagees to refund any such fees that have been collected, or to reverse any such fees that have been charged to accounts. Moreover, the guidance directs mortgagees to create a log of any registration fee charges and their subsequent corrections for inspection during their next NYDFS examination.