ARLINGTON, Va.–New rules for filing and calculating claims under the FHA’s insurance program could “severely impact” credit unions’ ability to provide credit to homebuyers, according to NAFCU.
In a comment letter to the Department of Housing and Urban Development regarding the Federal Housing Administration’s (FHA) proposal on single-family procedures for filing and calculating claims under the insurance program, NAFCU called on HUD to withdraw the proposed deadlines for filing FHA insurance claims.
“In general, the HUD proposal would impose two deadlines by which a lender must file claims for FHA insurance benefits and, if claims are not filed by the specified deadline, the FHA insurance benefits would be terminated,” noted NAFCU in its letter. “The first deadline would terminate insurance if the lender does not file a claim within one year of the reasonable diligence time limit established under § 203.356(b). The second deadline would terminate insurance if the lender does not file a claim within three months of a foreclosure sale, pre-foreclosure sale, or deed-in-lieu. Currently, the HUD regulations do not impose a deadline by which a claim for insurance benefits can be filed with FHA, because it is in the lenders best interest to file the claim and receive payment as quickly as feasible for the financial institution. NAFCU believes that the proposed deadlines will be unworkable because they fail to address the reasons that many lenders today are delayed in filing claims. Over the past few years, federal, state and local authorities have been consistently prolonging foreclosure timelines, yet HUD has not updated its timeframes to keep pace.”
The trade group said it believes that the reasonable diligence timeframe adopted by the proposal does not properly take into account changes in the mortgage foreclosure processes and procedures. “In particular, HUD's reasonable diligence deadlines are unworkable in states that follow judicial foreclosure procedures,” NAFCU wrote. “While lenders have always had a financial incentive to file claims and to recover losses as soon as possible, numerous occurrences beyond a lender's control can cause it to miss an applicable deadline. Timely compliance with the reasonable diligence deadline is often impossible, especially given the increasing regulatory requirements, such as HUD's loss mitigation and property preservation requirements that must be completed prior to conveyance. NAFCU believes that any filing deadline for an FHA insurance claim must accommodate the realities credit unions and other financial institutions face when preparing a property for conveyance to HUD.”
NAFCU said it was urging HUD to withdraw any rulemaking that would punish lenders for failing to comply with the deadlines because such a rule will significantly reduce FHA lending activity.