Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • FHA expedites claims process for HECMs

    Agency Rule-Making & Guidance

    On May 17, HUD announced new policies to expedite claims processing for home equity conversion mortgages (HECM). Specifically, FHA’s policies will allow for faster payment of funds to mortgagees upon assignment of an HECM to HUD by allowing borrowers with FHA mortgages to submit a request for a preliminary title approval earlier in the process and with fewer documents. Mortgagees will now be able to assign an HECM to HUD once the HECM reaches 98 percent of the maximum claim amount (MCA) and may begin submitting required information to HUD when the HECM reaches 97 percent of the MCA (based on the value of the property at the time the HECM loan is originated). The previous percentage was set at 97.5 percent. Additionally, mortgagees will be able to submit original notes and mortgages after assignment claim payment rather than before. HUD explained that allowing for earlier claim submission and improving document submission measures will hopefully shorten the time between the HECM reaching 98 percent of MCA and FHA paying the mortgagee for the claim.

    Agency Rule-Making & Guidance Federal Issues FHA Mortgages HECM HUD Consumer Finance

  • HUD extends Covid-19 forbearance through May

    Federal Issues

    On April 7, HUD issued Mortgagee Letter 2023-08, which extends through May 31 the final date for borrowers to request Covid-19 forbearance and home equity conversion mortgage (HECM) extensions. The extension is intended to allow ample time for affected borrowers to submit requests and for mortgagees to offer and process the requests in the event that the presidentially-declared national emergency ends earlier than originally expected. As stated in the letter, HUD determined that providing a short period beyond the expiration of the national emergency will be beneficial to both FHA borrowers and mortgagees. The extension will also align Covid-19 forbearance and HECM extension requests with the monthly billing cycle. The letter stated that no Covid-19 forbearance period may extend beyond November 30.

    Federal Issues HUD FHA Consumer Finance Covid-19 Mortgages Forbearance HECM

  • HUD announces Arkansas disaster relief

    Federal Issues

    On April 5, HUD announced disaster assistance for areas in Arkansas impacted by severe storms and tornadoes on March 31. The disaster assistance follows President Biden’s major disaster declaration on April 2. According to the announcement, HUD is providing immediate foreclosure relief, making FHA mortgage insurance available to disaster victims, and providing information on housing providers, as well as HUD-approved housing counseling agencies, among other measures. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties, as well as an automatic 90-day extension for home equity conversion mortgages, effective April 2. It is also making various FHA insurance options available to victims whose homes require repairs or were destroyed. HUD’s Section 203(h) program allows borrowers from participating FHA-approved lenders to obtain 100 percent financing, including closing costs, for homes that require “reconstruction or complete replacement.” HUD’s Section 203(k) loan program enables individuals to finance the repair of their existing homes or to include repair costs in the financing of a home purchase or a refinancing of a home through a single mortgage. HUD is also allowing administrative flexibilities for community planning and development grantees, as well as to public housing agencies and Tribes. Additionally, HUD is advising consumers who believe they have experienced housing discrimination as a result of the disaster to reach out to the agency’s Office of Fair Housing and Equal Opportunity.

    Federal Issues HUD Disaster Relief Consumer Finance Mortgages Arkansas

  • HUD announces Mississippi disaster relief

    Federal Issues

    On March 28, HUD announced disaster assistance for areas in Mississippi impacted by severe storms, straight-line winds, and tornadoes beginning March 24 to March 25. The disaster assistance follows President Biden’s major disaster declaration on March 26. According to the announcement, HUD is providing immediate foreclosure relief, making various FHA mortgage insurance available to disaster victims, and providing information on housing providers, as well as HUD-approved housing counseling agencies, among other measures. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties, as well as a 90-day extension granted automatically for home equity conversion mortgages, effective March 26. It is also making various FHA insurance options available to victims whose homes require repairs or were destroyed or severely damaged. HUD’s Section 203(h) program allows borrowers from participating FHA-approved lenders to obtain 100 percent financing, including closing costs, for homes that require “reconstruction or complete replacement.” HUD’s Section 203(k) loan program enables individuals to finance the repair of their existing homes or to include repair costs in the finance of a home purchase or a refinance of a home through a single mortgage. HUD is also allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.

    Federal Issues HUD Consumer Finance Mortgages Mississippi Disaster Relief

  • HUD restores 2013 discriminatory effects rule

    Agency Rule-Making & Guidance

    On March 17, HUD announced the submission of a final ruleReinstatement of HUD’s Discriminatory Effects Standard—which would rescind the agency’s 2020 regulation governing Fair Housing Act (FHA or the Act) disparate impact claims and reinstate the agency’s 2013 discriminatory effects rule. Explaining that “the 2013 rule is more consistent with how the [FHA] has been applied in the courts and in front of the agency for more than 50 years,” HUD emphasized that it also “more effectively implements the Act’s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market.”

    As previously covered by InfoBytes, in 2021, HUD proposed rescinding the 2020 rule, which was intended to align the 2013 rule with the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The 2020 rule included, among other things, a modification of the three-step burden-shifting framework in its 2013 rule, several new elements that plaintiffs must show to establish that a policy or practice has a “discriminatory effect,” and specific defenses that defendants can assert to refute disparate impact claims. According to HUD’s recent announcement, the modifications contained within the 2020 rule complicated the discriminatory effects framework, created challenges for establishing whether a policy violates the FHA, and made it harder for entities regulated by the Act to assess whether their policies were lawful.

    The final rule is effective 30 days after publication in the Federal Register. According to HUD, the 2020 rule never went into effect due to a preliminary injunction issued by the U.S. District Court for the District of Massachusetts, and the 2013 rule has been and currently is in effect. Regulated entities that have been complying with the 2013 rule will not need to change any practices currently in place to comply with the final rule, HUD said.

    Agency Rule-Making & Guidance Federal Issues HUD Discrimination Disparate Impact Fair Housing Fair Housing Act Fair Lending Consumer Finance

  • HUD establishes 40-year loss-mit option

    Agency Rule-Making & Guidance

    On March 8, HUD published a final rule in the Federal Register to allow mortgagees to increase the maximum term of a loan modification from 360 to 480 months for FHA-insured mortgages after a borrower defaults. HUD explained that “[i]ncreasing the maximum term limit will allow mortgagees to further reduce the borrower’s monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default.” The change also aligns FHA with modifications made available to borrowers with mortgages backed by Fannie Mae and Freddie Mac, both of which provide a 40-year loan modification option. HUD considered public comments in response to a proposed rule published last April (covered by InfoBytes here), and noted that commenters said a 40-year loan modification option would provide significant relief to struggling borrowers. Concurrently, HUD published Mortgagee Letter 2023-06 to establish the standalone 40-year loan modification policy. The final rule is effective May 8.

    Agency Rule-Making & Guidance Federal Issues FHA Mortgages Consumer Finance HUD Loss Mitigation Fannie Mae Freddie Mac

  • Biden administration urges states to join fee crack down

    Federal Issues

    On March 8, the Biden administration convened a gathering of state legislative leaders to hold discussions about so-called “junk fees”—described as the “unnecessary, unavoidable, or surprise charges” that obscure true prices and are often not disclosed upfront. While the announcement acknowledged actions taken by federal agencies over the past few years to crack down on these fees, the administration recognized the role states play in advancing this effort. The Guide for States: Cracking Down on Junk Fees to Lower Costs for Consumers outlined actions states can take to address these fees, and provided several examples of alleged junk fees, including hotel resort fees, debt settlement fees, event ticketing fees, rental car and car purchase fees, and cable and internet fees. The guide also highlighted “the banking industry’s excessive and unfair reliance on banking junk fees.” The administration pointed out that a number of businesses have changed their policies in response to the increased scrutiny of junk fees and said several banks have ended fees for overdraft protection. The same day, the CFPB released a new Supervisory Highlights, which focused on junk fees uncovered in deposit accounts and the auto, mortgage, student, and payday loan servicing markets (covered by InfoBytes here).

    Additionally, HUD Secretary Marcia L. Fudge published an open letter to the housing industry and state and local governments, encouraging them to “limit and better disclose fees charged to renters in advance of and during tenancy.” Fudge noted that “actions should aim to promote fairness and transparency for renters while ensuring that fees charged to renters reflect the actual and legitimate costs to housing providers.”

    California Attorney General Rob Bonta also issued a statement responding to the administration’s call to end junk fees. “Transparency and full disclosure in pricing are crucial for fair competition and consumer protection,” Bonta said, explaining that in February the state senate introduced legislation (see SB 478) to prohibit the practice of hiding mandatory fees.

    Federal Issues CFPB Consumer Finance Junk Fees Overdraft Biden State Issues HUD California State Attorney General

  • FHA proposes to ease branch office registration

    Agency Rule-Making & Guidance

    On March 1, FHA published FHA INFO 2023-14 announcing a proposed rule to eliminate a requirement that mortgagees and lenders register all branch offices conducting FHA business with HUD. Currently, all FHA-approved mortgagees and lenders are required to register any branch office where they originate Title I or II loans or submit applications for mortgage insurance. Due to technological advances and remote service delivery, this requirement is inconsistent with current industry practices, FHA said, explaining that the proposed rule will grant mortgagees and lenders the choice as to whether to register and maintain branch offices with HUD. The proposed rule also will make branch registration fees applicable only to those branch offices registered with HUD. Unregistered branch offices will not be subject to unnecessary registration fees and will not be placed on the HUD Lender List Search page. Comments on the proposed rule are due May 1.

    Agency Rule-Making & Guidance Federal Issues FHA Mortgages HUD

  • FHA codifies SOFR for LIBOR-based ARMs

    Agency Rule-Making & Guidance

    On March 1, FHA published a final rule in the Federal Register removing LIBOR as an approved index for adjustable-rate mortgages (ARMs) and replacing it with the Secured Overnight Financing Rate (SOFR) as the approved index for newly-originated forward ARMs. The final rule also codifies HUD’s removal of LIBOR and approval of SOFR as an index for newly-originated home equity conversion mortgages (HECM) ARMs, and establishes “a spread-adjusted SOFR index as the Secretary-approved replacement index to transition existing forward and HECM ARMs off LIBOR.” Additionally, the final rule makes several clarifying changes and establishes a 10 percentage points maximum lifetime adjustment cap for monthly adjustable rate HECMs. The agency considered comments received to its proposed rule published last October (covered by InfoBytes here), and said the updated policy will now “generally align with Fannie Mae, Freddie Mac, and Ginnie Mae's policies replacing LIBOR with the SOFR index.” The final rule is effective March 31. 

    Agency Rule-Making & Guidance Federal Issues FHA HUD Mortgages LIBOR Adjustable Rate Mortgage HECM SOFR

  • FHA reduces mortgage insurance premiums to improve home affordability

    Agency Rule-Making & Guidance

    On February 22, FHA announced a 30 basis point reduction in the annual premium charged to mortgage borrowers, resulting in mortgage insurance premiums of 0.55 percent for most borrowers seeking FHA-insured mortgages (down from 0.85 percent). (See also Mortgagee Letter 2023-05.) The reduction will apply to nearly all FHA-insured Single Family Title II forward mortgages, and is applicable to all eligible property types including single family homes, condominiums, and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts. According to the announcement, the reduction is intended to build on steps taken by the Biden administration to make homeownership more affordable and accessible, particularly for households of color, and could save an estimated 850,000 borrowers an average of $800 annually. As previously covered by InfoBytes, last September HUD modified FHA’s underwriting policies to allow lenders to consider a first-time homebuyer’s positive rental payment history as an additional factor in determining eligibility for an FHA-insured mortgage, and in March, the Property Appraisal and Valuation Equity Task Force outlined steps for addressing alleged racial bias in home appraisals (covered by InfoBytes here). Additional actions taken by HUD to improve homeownership accessibility can be found here.

    Agency Rule-Making & Guidance Federal Issues HUD FHA Consumer Finance Mortgages Mortgage Insurance Mortgage Insurance Premiums Biden

Pages

Upcoming Events