The section of the federal government’s 2023 spring regulatory agenda, released recently by the White House, contains more than 50 proposed rules from the U.S. Housing and Urban Development (HUD) Department.
Among the multitude of proposals primarily targeting the forward mortgage sector, there are two noteworthy ones that pertain to both the Home Equity Conversion Mortgage (HECM) program and the Federal Housing Administration (FHA).
The initial proposal centers around enhancing the servicing and claim requisites for FHA-insured mortgages.
This proposed rule aims to alleviate the financial burden associated with servicing. The escalating costs of servicing, whether for performing or non-performing mortgages, over the past decade have had repercussions for borrowers and servicers, who often face the brunt through elevated mortgage fees.
The proposal aims to enhance HUD’s capacity to manage the Mutual Mortgage Insurance (MMI) Fund and to create a more streamlined system for mortgagee curtailment of interest, ensuring equitable application across all disposition methods.
Furthermore, the proposed rule intends to impose limitations on reimbursement for property-related expenses, confining them to specific timeframes for forward and Home Equity Conversion Mortgages (HECMs). Furthermore, it aims to set a specific timeframe that defines the responsibility of the Federal Housing Administration (FHA) for claim payments related to insurance benefits.
According to the Office of Information and Regulatory Affairs (OIRA) under the Office of Management and Budget (OMB), an initial notice of proposed rulemaking is anticipated to be published by December 2023.
The second proposed rule concerning Home Equity Conversion Mortgages (HECMs) would modify HUD’s limitations on re-sales for both forward and reverse mortgages. The goal is to offer more flexibility in determining suitable tools and documentation requirements based on the specific transaction risk, as mentioned in the entry on the OIRA website.
The proposed rule argues that restricting or prohibiting the use of FHA mortgage insurance for a re-sale within 90 days of acquisition falls outside the purview of risk management practices implemented through technology in other segments of the market. Furthermore, it emphasizes that such restrictions have a negative impact on the availability of affordable housing.
According to the OIRA website, the initial notice of proposed rulemaking for this regulation is expected to be published in March 2024.