By Weiner Brodsky Kider and NRMLA staff
On April 4, 2023, FHA posted a draft Mortgagee Letter (ML) that would make changes to the HECM Assignment Claim Type 22 submission criteria. The HECM Assignment Claim Type 22 allows a mortgagee to assign a HECM that is in good standing to FHA and submit a claim up to the maximum claim amount (MCA).
Comments on the draft ML must be submitted by April 11, 2023. NRMLA is reviewing the draft ML with the leadership of the Servicing Committee, HMBS Issuer Committee, and the Executive Committee, and plans on submitting formal comments within the required timeframe.
FHA’s proposal may improve efficiencies in the assignment process and help reduce liquidity strain by lessening the amount of time that a mortgagee must hold a loan on its balance sheet between the time the loan is bought out of a Ginnie Mae HMBS pool and when the assignment is accepted by HUD.
Among other things, the draft ML would lower the threshold for submitting assignment claims for review from 97.5 percent of the MCA to 97 percent of the MCA. FHA notes that this will support the timely payment of assignment claims and provide additional flexibility for mortgagees in managing their HECM portfolios. Assignment approval will not be granted until the outstanding loan balance is greater than or equal to 98 percent of the MCA. Additionally, the draft ML would require mortgagees to submit original HECM notes and security instruments no later than 90 days after the assignment claim payment date.
Moreover, for HECMs with FHA case numbers assigned before September 19, 2017, the ML changes the date that mortgagees must submit recorded assignments of the mortgage to FHA’s loan servicing contractor from no later than 6 months after the date of assignment claim payment, to no later than 12 months after the date of assignment claim payment. This change reduces the burden on mortgagees associated with programing requirements by aligning the deadline for delivering recorded assignments, regardless of the HECM’s FHA case number assignment date.
The draft ML also reminds mortgagees that if it is determined that a HECM for which a HECM Assignment Claim Type 22 has been paid did not, at the time of initial assignment application and continually until claim payment, meet all assignment claim criteria, the mortgagee must repurchase the HECM within 30 days of notice from FHA of the defect. Similarly, if the original note, security instrument or recorded assignment are not provided within the required time frames, the mortgagee must repurchase the HECM within 30 days of FHA’s defect notice. FHA states that it may, in its sole discretion, allow the mortgagee one 30-day period to cure the defect requiring repurchase. If the mortgagee refuses or is unable to cure the defect, the mortgagee must complete the repurchase of the assigned mortgage no later than 60 days from the date of the initial notice of defect.
(Editor’s note: Weiner Brodsky Kider serves as outside counsel to NRMLA.)