[Federal Register Volume 80, Number 128 (Monday, July 6, 2015)]
[Proposed Rules]
[Pages 38410-38417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16479]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-5742-P-01]
RIN 2502-AJ23
Federal Housing Administration (FHA): Single Family Mortgage
Insurance Maximum Time Period for Filing Insurance Claims, Curtailment
of Interest and Disallowance of Operating Expenses Incurred Beyond
Certain Established Timeframes
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would establish the maximum time period
within which an FHA-approved mortgagee must file a claim with FHA for
insurance benefits. HUD's current regulations are silent with respect
to a deadline by which a claim for insurance benefits must be filed
with FHA. Due to the downturn in the housing market, which resulted in
a significant increase in mortgage defaults, some mortgagees have
refrained from promptly filing claims for insurance benefits and
instead have opted to wait and file multiple claims with FHA at a
single point in time. The uncertainty regarding a deadline by which a
claim must be
[[Page 38411]]
filed, and the number of claims currently being filed at a single point
in time strain FHA resources and negatively impact FHA's ability to
project the future state of the Mutual Mortgage Insurance Fund (MMIF),
and, consequently, the ability of FHA to fulfill its statutory
obligation to safeguard the MMIF. To address this concern, HUD proposes
to establish a deadline by which a mortgagee must file a claim for
insurance benefits. This rule also proposes to revise HUD's policies
concerning the curtailment of interest and the disallowance of certain
expenses incurred by a mortgagee as a result of the mortgagee's failure
to timely initiate foreclosure or timely take such other action that is
a prerequisite to submission of a claim for insurance.
DATES: Comment Due Date: September 4, 2015.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street SW., Room
10276, Washington, DC 20410-0500. Communications must refer to the
above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly encourages commenters to submit
comments electronically. Electronic submission of comments allows the
commenter maximum time to prepare and submit a comment, ensures timely
receipt by HUD, and enables HUD to make them immediately available to
the public. Comments submitted electronically through the
www.regulations.gov Web site can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
proposed rule.
No Facsimile Comments. Facsimile (fax) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m., weekdays, at
the above address. Due to security measures at the HUD Headquarters
building, an appointment to review the public comments must be
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). Individuals with speech or
hearing impairments may access this number by calling the Federal Relay
Service at 800-877-8339. Copies of all comments submitted are available
for inspection and downloading at www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Ivery Himes, Director, Office of
Single Family Asset Management, Office of Housing, Department of
Housing and Urban Development, 451 7th Street SW., Room 9172,
Washington, DC 20410; telephone number 202-708-1672 (this is not a
toll-free number). Persons with hearing or speech impairments may
access this number by calling the Federal Relay Service at 800-877-8339
(this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
HUD's regulations for FHA single family mortgage insurance are
codified in 24 CFR part 203. These regulations address mortgagee
eligibility requirements and underwriting procedures, contract rights
and obligations, and the mortgagee's servicing obligations. These
regulations also address action to be taken by a mortgagee when a
mortgagor defaults on a loan, such as undertaking loss mitigation as
provided in Sec. 203.501. However, if it is determined that the
default is not curable, the mortgagor does not remain in the home, or
both, the mortgagee is eligible to file a claim for insurance benefits.
(See Sec. Sec. 203.330 through 203.417.) While the current regulations
and related guidance \1\ and applicable claim form \2\ provide detailed
directions about filing a claim for insurance benefits and address
various conditions that may be applicable to the filing of a claim (for
example, requirements applicable to the title to the property or the
condition of the property), the regulations do not establish a deadline
by which a mortgagee must file a claim for insurance benefits with FHA
except for loans covered under Sec. 203.474. Under the current
regulations, as long as the mortgagee complies with all applicable
requirements related to a claim for insurance, the mortgagee may file
its claim at any time. With respect to payment of the claim, generally
FHA pays a claim based on an automated process that includes edit
checks and performs post payment reviews.
---------------------------------------------------------------------------
\1\ See http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh/4330.4 and
https://entp.hud.gov/pdf/mp_sfs3_cp_clminpt.pdf.
\2\ http://www.hud.gov/offices/adm/hudclips/forms/files/27011.pdf.
---------------------------------------------------------------------------
Mortgagees generally file claims for FHA mortgage insurance within
2 months after the date of the foreclosure sale. In recent years,
however, some mortgagees altered this practice and opted to wait and
file multiple claims with FHA at a single point in time. In some
instances, mortgagees delayed filing claims for 2 years or more after
foreclosure sales. The uncertainty regarding the timing of the filing
of claims and the high number of claims filed all at once strain FHA
resources. This activity has the potential to negatively impact HUD's
ability to project the future state of the MMIF, and, consequently,
FHA's ability to fulfill the statutory obligation to safeguard the
MMIF. A delay in filing a claim also increases interest, property
charges and other expenses included in the insurance benefit claim and
can result in additional decline in the value of a property that had
been the security for the FHA-insured mortgage foreclosed by the
mortgagee, thereby reducing the amount FHA could recover on a real
estate owned (REO) sales transaction. The proposed rule is designed to
address these concerns.
II. This Proposed Rule
Through this rule, HUD proposes to amend FHA's regulations in
subpart B of 24 CFR part 203, which govern the contract rights and
obligations pertaining to FHA single family mortgage insurance. The
proposed rule would add a new Sec. 203.317a which would terminate the
contract of insurance if the mortgagee fails to file a claim within the
maximum time periods established in this rule. It would also amend
Sec. 203.318 to provide that written notice of termination required by
this section is not required for termination under new Sec. 203.317a.
The proposed rule would add a new Sec. 203.372 that would establish a
deadline by which an FHA-approved mortgagee (or its approved servicer)
must file a claim for insurance benefits. In addition, the proposed
rule would amend Sec. 203.402 to establish a deadline to be eligible
for reimbursement of certain expenses
[[Page 38412]]
related to the filing of a claim for insurance benefits and to refine
the process by which FHA would curtail interest and decline to
reimburse certain expenses under this section. The proposed rule would
also amend the heading of Sec. 203.474. These changes would only apply
prospectively and would take effect for mortgages endorsed for
insurance on or after the effective date of the final rule.
Termination of Contract of Insurance for Mortgagee's Failure To File a
Claim
New Sec. 203.317a of this proposed rule would cause the contract
of insurance to terminate if the mortgagee fails to file a claim within
the maximum allowable time periods for filing the claim, and the
proposed amendment to Sec. 203.318 would exempt this type of
termination from the written notice requirements.
Deadline by Which Mortgagee Must File a Claim for Insurance Benefits
In general, proposed Sec. 203.372 will prohibit the filing of a
claim for insurance benefits after the passage of a specified amount of
time following certain events relating to the submission of a claim.
Additionally, it will prohibit the filing of any claim more than 12
months after expiration of a period of time from the date of default
that is equal to the amount of time provided in the reasonable
diligence timeframe established under Sec. 203.356(b). For purposes of
this proposed rule, the date of default is the date defined in 24 CFR
203.331, or 203.467 for rehabilitation loans.
For a property acquired by the mortgagee through foreclosure, new
Sec. 203.372 would require the mortgagee to file a claim for insurance
benefits no later than 3 months from the occurrence of one of the
following events, whichever is the last to occur: (1) The date of the
foreclosure sale; (2) the date of expiration of the redemption period
(the period allowed the mortgagor to redeem and regain ownership of the
property); (3) the date the mortgagee acquires possession of the
property (i.e., the property is vacant); or (4) such further time as
the Secretary or Secretary's designee may approve in writing, but in no
case may a claim be filed more than 12 months after expiration of a
period of time from the date of default that is equal to the amount of
time provided in the reasonable diligence time period established
pursuant to Sec. 203.356(b), unless an extension is granted pursuant
to Sec. 203.496. If a claim is not timely filed, the mortgagee retains
ownership of the property and forfeits its right to file a claim for
insurance benefits.
For a property sold through a pre-foreclosure sale (PFS), or Claim
Without Conveyance of Title (CWCOT), new Sec. 203.372 would require
the mortgagee to file a claim for insurance benefits no later than 3
months following the date of the closing, for PFS, and no more than 12
months after expiration of a period of time from the date of default
that is equal to the amount of time provided in the reasonable
diligence time period for foreclosure, for CWCOT. If a claim is not
timely filed, the mortgagee forfeits its right to file a claim for
insurance benefits.
For a property acquired by the mortgagee through a deed-in-lieu of
foreclosure, new Sec. 203.372 would require the mortgagee to file a
claim for insurance benefits no later than 3 months following the date
of conveyance of the property to the mortgagee or the date of
conveyance of the property to HUD, the date of execution of the deed by
the mortgagor, or no more than 12 months after the expiration of a
period of time from the date of default that is equal to the reasonable
diligence time period for foreclosure, whichever occurs first.
The proposed deadline for filing mortgage insurance claims will
bring greater certainty to the claims process, thereby facilitating
HUD's ability to comply with its statutory obligation to protect the
FHA insurance funds. HUD believes that these time periods in which to
submit a claim for insurance, as proposed in new Sec. 203.372, provide
mortgagees with sufficient time to take all action necessary to file a
claim for insurance benefits. The proposed deadlines would not deny
mortgagees the administrative benefits of submitting multiple claims at
one time, as long as the individual claims being filed fall within the
relevant time periods proposed by this rule. Additionally, the filing
of a claim will not toll the deadlines proposed in this rule or
guarantee an extension of time in which to file or refile a claim that
was withdrawn or denied for any reason.
Disallowance of Expenses and Requirement To Curtail Interest Due to
Failure To Meet Established Timelines
In addition to establishing a deadline by which a mortgagee must
file a claim for insurance benefits, this rule proposes to amend Sec.
203.402 to disallow expenses incurred by a mortgagee prior to the
filing of a claim for insurance benefits where such expenses result
from a mortgagee's failure to timely initiate foreclosure action or
timely take such other action that is a prerequisite to submission of a
claim for insurance as established in the part 203, subpart B,
regulations.
The amended Sec. 203.402 emphasizes the need to meet the timelines
established in the part 203, subpart B, regulations that pertain to
claim procedures and payment of insurance benefits, and where such
deadlines are not met, FHA will not reimburse related costs. This
proposed rule would refine the time periods in which such expenses are
disallowed to provide only for the curtailment of interest and
reduction in expenses incurred as a result of the mortgagee's delay.
Specifically, in proposed Sec. Sec. 203.402(k)(1)(ii),
203.402(k)(2)(iii), and 203.402(k)(3)(iii), the interest would be
reduced only by the amount determined to have been incurred as a result
of the failure of the mortgagee to comply with the specified time
periods, rather than for the remaining duration of the life of the
mortgage and related FHA insurance contract. The amended Sec. 203.402
would also provide that if the claim is filed after any of the
timeframes set forth in new paragraph (u) of this section, then the
mortgagee must curtail expenses as provided in that paragraph. The
dates that would trigger curtailment of expenses due to failure to meet
a deadline on a claim that is filed timely include the following: (1)
The timeframe for taking First Legal Action to commence foreclosure;
(2) the reasonable diligence timeframe for the state in which the
property is located; (3) the timeframe to convey a property after
obtaining title and possession; (4) the timeframe for marketing a
property; or (5) any other timeframe established under this subpart
that is applicable to the claim for insurance benefits. If the amount
of incurred expenses is unavailable, then the mortgagee must estimate
the expenses incurred (as a prorated amount) as a result of not
complying with the deadlines specified for the events numbered (1)
through (5). However, nothing in this section limits FHA's right to
review a claim for any reason related to protection of the MMIF.
Examples of Claim Curtailment Proration
Example 1
The mortgagee completes First Legal Action on calendar day
230 instead of the First Legal Action deadline, which is day 180 (i.e.,
6 months). The allowable and reasonable costs including interest,
attorney fees, taxes, insurance, homeowner association (HOA)/
condominium association (COA) fees, maintenance, etc., incurred during
the First Legal
[[Page 38413]]
Action completion period total $2,750. An extension was either not
requested by the mortgagee or was requested and not approved by HUD.
Therefore, the mortgagee must curtail $597.82 = {[(230-180)/
230]*$2,750{time} of the First Legal Action costs.
The reasonable due diligence timeframe (which includes 30
days to file a claim) is 15 months from the completion of First Legal
Action in this hypothetical example.\3\ The mortgagee conveys the
property in conveyance condition in 13 months. The total allowable and
reasonable costs incurred for the above-referenced timeframe for taxes,
insurance, and maintenance is $15,085. Consequently, the mortgagee is
not required to curtail any additional cost.
---------------------------------------------------------------------------
\3\ Reasonable diligence timeframes are established for each
jurisdiction and updated by mortgagee letter.
---------------------------------------------------------------------------
Final Outcome: The mortgagee is required to curtail total
claim expenses of $597.82 = ($597.82+$0).
Example 2
A mortgagee receives a 30 day extension to evaluate a
mortgagor for loss mitigation because the mortgagor's expenses have
decreased since the previous evaluation for loss mitigation. However,
the mortgagor does not qualify for loss mitigation. The mortgagee
completes First Legal Action on calendar day 252 instead of the First
Legal Action deadline, which is day 210 (i.e., 6 months + 30 day
extension). The allowable and reasonable costs including interest,
attorney fees, taxes, insurance, maintenance, HOA/COA fees, etc.,
incurred during the First Legal Action completion period total $10,061.
Therefore, the mortgagee must curtail $1,676.83 = {[(252-210)/
252]*$10,061{time} of the First Legal Action costs.
The reasonable due diligence timeframe, which includes 30
days to file a claim, is 10 months (300 calendar days) from completing
First Legal Action in this hypothetical example.\4\ The mortgagee
conveys the property in conveyance condition in 540 calendar days. The
total allowable and reasonable costs incurred for the referenced
timeframe for taxes, insurance, and maintenance is $30,200. Therefore,
the mortgagee must curtail an additional $13,422.22 of claim cost =
{[(540-300)/540]*$30,200{time} .
---------------------------------------------------------------------------
\4\ Reasonable diligence timeframes are established for each
jurisdiction and updated by mortgagee letter.
---------------------------------------------------------------------------
Final Outcome: The mortgagee is required to curtail total
claim expenses of $15,099.05 = ($1,676.83+$13,422.22).
Existing Sec. 203.365, which pertains to documents and information
to be furnished to the Secretary under a claim review, lists items to
be furnished to the Secretary within 45 days after a deed is filed for
record in the case of a conveyance claim or within 30 days after the
closing of the pre-foreclosure sale in the case of a claim arising from
a pre-foreclosure sale. The amended Sec. 203.402 would provide for
review of all claims. The amended Sec. 203.402 further provides that,
regardless of how FHA reviews a claim for insurance, if FHA determines
that a claim includes costs not appropriately curtailed or reduced as
established in Sec. 203.402(u)(1), FHA may reduce the claim amount or
issue a demand for repayment of all improperly claimed expenses. FHA
may also offset future claims if such demand for repayment is not paid
by the mortgagee within 30 days.
The regulatory changes proposed by this rule emphasize the
importance of meeting established deadlines and provide for the denial
of insurance benefits and disallowance of payment of expenses where
such deadlines are not met.
III. Costs and Benefits of Proposed Rule
This rule proposes to establish a maximum time period within which
an FHA-approved mortgagee must file a claim with FHA for mortgage
insurance benefits. Currently, there is not a required timeframe in
which mortgagees must file claims for FHA mortgage insurance. The cost
to mortgagees of compliance with this proposed rule is expected to be
minimal. The cost of compliance for each loan is estimated to be $100,
but mortgagees currently bear these costs when they file a claim. This
cost consists of 15 minutes of supervisory review and 45 minutes of
staff preparation.
This proposed rule offers many important benefits to FHA, including
certainty regarding when payment will be sought on claims and increased
recovery on REO sales transactions. In recent years, some mortgagees
have opted to wait and file multiple FHA mortgage insurance claims at a
single point in time, sometimes delaying the filing of claims for 2
years or more. See Table 1 for data on the timing of the filing of
insurance claims. The uncertainty regarding the timing of the filing of
claims and the high number of claims filed all at once strain FHA
resources. This proposed rule will provide a better measurement of
expected claims because it provides a definite date for which the
mortgagee is no longer able to file a claim. Additionally, this
proposed rule would ease the burden on mortgagees by allowing for the
curtailment of interest and expenses associated with the actual delay
of the mortgagee, rather than all interest and expenses incurred beyond
a missed deadline until the termination of the insurance contract.
Table 1--Mortgagee Filing of Claims Within Specified Time Periods From FY 2008-2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Claims filed Claims filed Claims filed Claims filed Claims filed
within 30 days within 31-60 within 61-90 within 91-180 more than 180
of good & days of good & days of good & days of good days of good
Number of marketable marketable marketable & marketable & marketable
Fiscal year claims title or title or title or title or title or
processed & conveyance conveyance conveyance conveyance conveyance
paid (Total) extension extension extension extension extension
expiration expiration expiration expiration expiration
(percent) (percent) (percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2008................................................. 55,700 60.64 23.57 4.87 6.04 4.88
FY 2009................................................. 68,859 55.72 26.74 5.88 6.45 5.21
FY 2010................................................. 98,689 49.87 29.41 7.30 8.01 5.41
FY 2011................................................. 90,218 46.03 26.33 9.08 10.46 8.10
FY 2012................................................. 100,508 41.20 22.83 7.94 10.08 17.95
FY 2013................................................. 110,692 35.08 22.09 10.73 17.10 15.00
2014 (10/1/2013-7/18/2014).............................. 50,260 32.30 17.12 11.10 19.03 20.45
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 38414]]
The uncertainty resulting from long-delayed filing of FHA insurance
claims has the potential to negatively impact HUD's ability to project
the future state of the MMIF, and, consequently, FHA's ability to
fulfill its statutory obligation to safeguard the MMIF. Therefore,
establishing a timeframe in which mortgagees must file FHA mortgage
insurance claims will bring better predictability to FHA. The ability
to better project capitalization of the MMIF will lessen the likelihood
of FHA needing to obtain a capital infusion to support the solvency of
the MMIF.
When the filing of an FHA insurance claim is delayed, it also
results in increased property charges and other expenses included in
the insurance benefit claim and can result in additional decline in the
value of a property that had been the security for the FHA-insured
mortgage foreclosed by the mortgagee, thereby reducing the amount FHA
could recover on REO sales transactions. By preventing delayed claim
filing, FHA expects to reduce claim cost, primarily due to taxes and
insurance, of more than $1,000 per loan for claims filed after the
reasonable due diligence timeframes. These benefits, coupled with the
minimal compliance costs, motivate FHA's pursuit of this new policy.
IV. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in this document
have been approved by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned
OMB Control Number 2502-0429. In accordance with the Paperwork
Reduction Act, HUD may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection displays a currently valid OMB control number.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This proposed rule would address an issue that has arisen recently
and that is the high number of defaults resulting from the downturn in
the housing market that began in late 2007 and early 2008. Until that
point, FHA-approved mortgagees filed insurance claims within a
reasonable time following a foreclosure of the property or the last
event that must be taken by an FHA-approved mortgagee prior to filing
the insurance claim. HUD understands the strain on resources placed on
FHA-approved mortgagees facing a high number of defaults by their
mortgagors, and that bundling and filing multiple claims at a single
point in time may be administratively convenient for the mortgagees.
However, submission of a high number of claims to FHA by one single
mortgagee at one single point in time long after the triggering event
strains FHA resources and negatively impacts FHA's ability to project
the future state of the MMIF, and, consequently, FHA's ability to
fulfill its statutory obligation to safeguard the MMIF. The recent
filing of multiple claims at a single point in time has emphasized to
FHA the need to establish a deadline for filing insurance claims, which
are absent from the regulations. While government and the industry have
been working diligently since 2008 to implement requirements and
measures to be taken to avoid another housing crisis, a clear deadline
for filing an insurance claim will benefit both FHA and FHA-approved
mortgagees.
HUD believes that the relevant time periods to file a claim for
insurance benefits are reasonable periods for all FHA-approved
mortgagees, large and small, and will not adversely affect any
mortgagee. Additionally, HUD's existing regulations authorize the FHA
Commissioner to extend any time period for action to be taken by FHA-
approved mortgagees under the regulations of 24 CFR part 203, subpart
C, and this authorization allows the FHA Commissioner to take into
consideration any difficulties that may be faced by a mortgagee to meet
a deadline. Moreover, this rule will benefit mortgagees because it will
require mortgagees to only curtail the expenses and interest associated
with the length of the delay beyond a required deadline, rather than
all otherwise permissible expenses after a missed deadline for the
remaining life of the loan, regardless of the length of the delay. At
present, a missed foreclosure initiation deadline by one day could
result in interest curtailment and disallowance of expenses for the
remaining life of the loan, through the entire foreclosure and
conveyance process until final termination of the FHA insurance
contract.
Accordingly, the undersigned certifies that this rule will not have
a significant economic impact on a substantial number of small
entities. Notwithstanding HUD's determination that this rule will not
have a significant economic impact on a substantial number of small
entities, HUD specifically invites comments regarding any less
burdensome alternatives to this rule that will meet HUD's objectives as
described in the preamble to this rule.
Environmental Impact
The proposed rule does not direct, provide for assistance or loan
and mortgage insurance for, or otherwise govern or regulate, real
property acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either (i) imposes substantial direct compliance costs on state and
local governments and is not required by statute, or (ii) preempts
state law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive Order. This proposed rule
would not have federalism implications and would not impose substantial
direct compliance costs on state and local governments or preempt state
law within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments, and on the private sector. This proposed rule would
not impose any federal mandates on any state, local, or tribal
governments, or on the private sector, within the meaning of the UMRA.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for Mortgage
Insurance--Homes is 14.117.
List of Subjects in 24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance,
[[Page 38415]]
Reporting and recordkeeping requirements, Solar energy.
Accordingly, for the reasons described in the preamble, HUD
proposes to amend 24 CFR part 203 as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
0
1. The authority citation for part 203 continues to read as follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, 1715z-16, 1715u, and
1717z-21; 42 U.S.C. 3535(d).
0
2. Add Sec. 203.317a to read as follows:
Sec. 203.317a Termination for mortgagee's failure to file a claim.
For mortgages endorsed for insurance on or after [insert effective
date], the contract of insurance shall be terminated if the mortgagee
fails to file a claim within the maximum time periods for filing a
claim of insurance benefits in Sec. 203.372.
0
3. Revise Sec. 203.318 to read as follows:
Sec. 203.318 Notice of termination by mortgagee.
No contract of insurance shall be terminated until the mortgagee
has given written notice thereof to the Commissioner within 15 calendar
days from the occurrence of one of the approved methods of termination
set forth in this subpart, except that such written notice is not
required for termination of the insurance contract under Sec.
203.317a.
0
4. Add Sec. 203.372 to read as follows:
Sec. 203.372 Maximum time period for filing a claim for insurance
benefits.
(a) This section applies to mortgages endorsed for insurance on or
after [insert effective date].
(b) No claim for insurance benefits may be filed, regardless of
claim processing type, more than 12 months after expiration of a period
of time from the date of default that is equal to the amount of time
provided in the reasonable diligence timeframe established under Sec.
203.356(b) for the jurisdiction unless the Secretary has approved an
extension. In the event any applicable redemption period exceeds the
claim filing timeframe as stated in the previous sentence, the
timeframe will be extended by a period of time equal to the applicable
redemption period, unless the conveyance is permitted by FHA during the
redemption period.
(c) In addition to the time period in paragraph (b) of this
section, no conveyance, pre-foreclosure sale, or deed-in-lieu claim may
be filed outside of the time period established by claim type under
this paragraph.
(1) Property acquired by foreclosure. For a property acquired by
foreclosure, a mortgagee must file a claim for insurance benefits no
later than 3 months from the date of the occurrence of one the
following events, whichever event is the last to occur:
(i) The date of the foreclosure sale;
(ii) The date of expiration of the redemption period (the period
allowed the mortgagor to redeem and regain ownership of the property);
(iii) The date that the mortgagee acquires possession of the
property (i.e., the property is vacant); or
(iv) Such further time as the Secretary or the Secretary's designee
may approve in writing.
(2) Property not acquired by the Secretary. For a property not
acquired by the Secretary that is sold through a pre-foreclosure sale
or the claim without conveyance of title (CWCOT) process, the mortgagee
must file a claim for insurance benefits no later than 3 months
following the date of closing, for a pre-foreclosure sale; or the date
determined in paragraph (b)(1) of this section, for a CWCOT.
(3) Property acquired by means other than foreclosure. For a
property acquired by deed-in-lieu of foreclosure, the mortgagee must
file a claim for insurance benefits no later than 3 months from the
date of conveyance of the property to the mortgagee or the date of
conveyance of the property to the Secretary, whichever occurs first.
(d) Resubmission of claims. The filing of a claim does not toll the
time periods set forth in this section or guarantee an extension of
time in which to file or refile a claim that has been withdrawn or
denied for any reason, including claims resubmitted after the initial
claim resulted in a repurchase of a loan or reconveyance of property.
0
5. Amend Sec. 203.402 to revise paragraph (k) and add paragraph (u) to
read as follows:
Sec. 203.402 Items included in payment--conveyed and non-conveyed
properties.
* * * * *
(k)(1) Except as provided in paragraphs (k)(1)(i) and (ii) of this
section, for properties conveyed to the Secretary and endorsed for
insurance on or before January 23, 2004, an amount equivalent to the
debenture interest that would have been earned, as of the date such
payment is made, on the portion of the insurance benefits paid in cash,
if such portion had been paid in debentures, and for properties
conveyed to the Secretary and endorsed for insurance after January 23,
2004, debenture interest at the rate specified in Sec. 203.405(b) from
the date specified in Sec. 203.410, as applicable, to the date of
claim payment, on the portion of the insurance benefits paid in cash.
(i) For properties endorsed for insurance on January 24, 2004
through [insert day before effective date]:
(A) When the mortgagee fails to meet any one of the applicable
requirements of Sec. Sec. 203.355, 203.356(b), 203.359, 203.360,
203.365, 203.606(b)(l), or 203.366 within the specified time and in a
manner satisfactory to the Secretary (or within such further time as
the Secretary may approve in writing), the interest allowance in such
cash payment shall be computed only to the date on which the particular
required action should have been taken or to which it was extended; and
(B) When the mortgagee fails to meet the requirements of Sec.
203.356(a) within the specified time and in a manner satisfactory to
the Secretary (or within such further time as the Secretary may specify
in writing), the interest allowance in such cash payment shall be
computed to a date set administratively by the Secretary.
(ii) For properties endorsed for insurance on or after [insert
effective date]:
(A) When the mortgagee fails to meet any one of the applicable
requirements of Sec. Sec. 203.355, 203.356(b), 203.359, 203.360,
203.365, 203.606(b)(l), 203.366, or 203.402(u), within the specified
time and in a manner satisfactory to the Secretary (or within such
further time as the Secretary may approve in writing), the interest
allowance in such cash payment shall be reduced by the amount
determined, based on a pro rata calculation of interest by day, to have
been incurred as a result of the failure of the mortgagee to comply
with the specified time period; and
(B) When the mortgagee fails to meet the requirements of Sec.
203.356(a) within the specified time and in a manner satisfactory to
the Secretary (or within such further time as the Secretary may specify
in writing), the interest allowance in such cash payment shall be
reduced by the amount determined, based on a pro rata calculation of
interest by day, to have been incurred as a result of the failure of
the mortgagee to comply with the specified time period set
administratively by the Secretary.
(2)(i) Where a claim for insurance benefits is being paid without
conveyance of title to the Commissioner in accordance with Sec.
203.368 and was endorsed for insurance on or before January 23, 2004,
an amount equivalent to the sum of:
(A) The debenture interest that would have been earned, as of the
date the
[[Page 38416]]
mortgagee or a party other than the mortgagee acquires good marketable
title to the mortgaged property, on an amount equal to the amount by
which an insurance claim determined in accordance with Sec. 203.401(a)
exceeds the amount of the actual claim being paid in debentures; plus
(B) The debenture interest that would have been earned from the
date the mortgagee or a party other than the mortgagee acquires good
marketable title to the mortgaged property to the date when payment of
the claim is made, on the portion of the insurance benefits paid in
cash if such portion had been paid in debentures, except that if the
mortgagee fails to meet any of the applicable requirements of
Sec. Sec. 203.355, 203.356, and 203.368(i)(3) and (5) within the
specified time and in a manner satisfactory to the Commissioner (or
within such further time as the Commissioner may approve in writing),
the interest allowance in such cash payment shall be computed only to
the date on which the particular required action should have been taken
or to which it was extended.
(ii) Where a claim for insurance benefits is being paid without
conveyance of title to the Commissioner in accordance with Sec.
203.368 and was endorsed for insurance on January 24, 2004 through
[insert day before effective date], an amount equivalent to the sum of:
(A) Debenture interest at the rate specified in Sec. 203.405(b)
from the date specified in Sec. 203.410, as applicable, to the date
that the mortgagee or a party other than the mortgagee acquires good
marketable title to the mortgaged property, on an amount equal to the
amount by which an insurance claim determined in accordance with Sec.
203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
(B) Debenture interest at the rate specified in Sec. 203.405(b)
from the date the mortgagee or a person other than the mortgagee
acquires good marketable title to the mortgaged property to the date
when payment of the claim is made, on the portion of the insurance
benefits paid in cash, except that if the mortgagee fails to meet any
of the applicable requirements of Sec. Sec. 203.355, 203.356, and
203.368(i)(3) and (5) within the specified time and in a manner
satisfactory to the Commissioner (or within such further time as the
Commissioner may approve in writing), the interest allowance in such
cash payment shall be computed only to the date on which the particular
required action should have been taken or to which it was extended.
(iii) Where a claim for insurance benefits is being paid without
conveyance of title to the Commissioner in accordance with Sec.
203.368 and was endorsed for insurance on or after [insert effective
date], an amount equivalent to the sum of:
(A) Debenture interest at the rate specified in Sec. 203.405(b)
from the date specified in Sec. 203.410, as applicable, to the date
that the mortgagee or a party other than the mortgagee acquires good
marketable title to the mortgaged property, on an amount equal to the
amount by which an insurance claim determined in accordance with Sec.
203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
(B) Debenture interest at the rate specified in Sec. 203.405(b)
from the date the mortgagee or a person other than the mortgagee
acquires good marketable title to the mortgaged property to the date
when payment of the claim is made, on the portion of the insurance
benefits paid in cash, except that if the mortgagee fails to meet any
of the applicable requirements of Sec. Sec. 203.355, 203.356,
203.368(i)(3) and (5), and 203.402(u) within the specified time and in
a manner satisfactory to the Commissioner (or within such further time
as the Commissioner may approve in writing), the interest allowance in
such cash payment shall be reduced by the amount determined, based on a
pro rata calculation of interest by day, to have been incurred as a
result of the failure of the mortgagee to comply with the specified
time period.
(3)(i) Where a claim for insurance benefits is being paid following
a pre-foreclosure sale, without foreclosure or conveyance to the
Commissioner in accordance with Sec. 203.370, and the mortgage was
endorsed for insurance on or before January 23, 2004, an amount
equivalent to the sum of:
(A) The debenture interest that would have been earned, as of the
date of the closing of the pre-foreclosure sale on an amount equal to
the amount by which an insurance claim determined in accordance with
Sec. 203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
(B) The debenture interest that would have been earned, from the
date of the closing of the pre-foreclosure sale to the date when
payment of the claim is made, on the portion of the insurance benefits
paid in cash, if such portion had been paid in debentures; except that
if the mortgagee fails to meet any of the applicable requirements of
Sec. 203.365 within the specified time and in a manner satisfactory to
the Commissioner (or within such further time as the Commissioner may
approve in writing), the interest allowance in such cash payment shall
be computed only to the date on which the particular required action
should have been taken or to which it was extended.
(ii) Where a claim for insurance benefits is being paid following a
pre-foreclosure sale, without foreclosure or conveyance to the
Commissioner, in accordance with Sec. 203.370, and the mortgage was
endorsed for insurance on January 24, 2004 through [insert day before
effective date], an amount equivalent to the sum of:
(A) Debenture interest at the rate specified in Sec. 203.405(b)
from the date specified in Sec. 203.410, as applicable, to the date of
the closing of the pre-foreclosure sale, on an amount equal to the
amount by which an insurance claim determined in accordance with Sec.
203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
(B) Debenture interest at the rate specified in Sec. 203.405(b)
from the date of the closing of the pre-foreclosure sale to the date
when the payment of the claim is made, on the portion of the insurance
benefits paid in cash, except that if the mortgagee fails to meet any
of the applicable requirements of Sec. 203.365 within the specified
time and in a manner satisfactory to the Commissioner (or within such
further time as the Commissioner may approve in writing), the interest
allowance in such cash payment shall be computed only to the date on
which the particular required action should have been taken or to which
it was extended.
(iii) Where a claim for insurance benefits is being paid following
a pre-foreclosure sale, without foreclosure or conveyance to the
Commissioner, in accordance with Sec. 203.370, and the mortgage was
endorsed for insurance on or after [insert effective date], an amount
equivalent to the sum of:
(A) Debenture interest at the rate specified in Sec. 203.405(b)
from the date specified in Sec. 203.410, as applicable, to the date of
the closing of the pre-foreclosure sale, on an amount equal to the
amount by which an insurance claim determined in accordance with Sec.
203.401(a) exceeds the amount of the actual claim being paid in
debentures; plus
(B) Debenture interest at the rate specified in Sec. 203.405(b)
from the date of the closing of the pre-foreclosure sale to the date
when the payment of the claim is made, on the portion of the insurance
benefits paid in cash, except that if the mortgagee fails to meet any
of the applicable requirements of Sec. 203.365 within the specified
time and
[[Page 38417]]
in a manner satisfactory to the Commissioner (or within such further
time as the Commissioner may approve in writing), the interest
allowance in such cash payment shall be reduced by the amount
determined, based on a pro rata calculation of interest by day, to have
been incurred as a result of the failure of the mortgagee to comply
with the specified time period.
* * * * *
(u) Disallowance of expenses due to mortgagee failure to meet
timelines. Notwithstanding any other provision of this section, FHA may
deny payment of any amount claimed for any expenses, such as taxes,
special assessments, hazard insurance, forced placed insurance, flood
insurance, homeowner association (HOA)/condominium association (COA)
fees or dues, utilities, inspections, debris removal, and any property
preservation and protection expenses, that were paid or incurred by or
on behalf of the mortgagee during any period of delay or as a result of
any delay by the mortgagee in taking any required actions prior to the
expiration of the time periods set forth in paragraph (u)(1) of this
section.
(1) If a mortgagee fails to comply with any of the timeframes
established by the Secretary for actions set forth in this paragraph,
the mortgagee must curtail all claim expenses in accordance with
paragraph (u)(2) of this section:
(i) The timeframe for taking of First Legal Action to commence
foreclosure;
(ii) The reasonable diligence timeframes established by the state
in which the property is located;
(iii) The timeframe to convey a property after obtaining title and
possession;
(iv) The timeframe for marketing a property; or
(v) Any other timeframe established under this subpart that is
applicable to the mortgagee's filing of a claim for insurance benefits.
(2) For a mortgagee that does not meet one or more of the deadlines
in paragraph (u)(1) of this section, the mortgagee must curtail on a
prorated basis:
(i) Expenses in paragraph (u) of this section incurred during or as
a result of any failure by the mortgagee to act within the applicable
time period; or
(ii) Expenses that are reasonably estimated to have been incurred
during or as a result of any failure by the mortgagee to act within the
applicable time period if the amount of expenses specifically incurred
beyond the applicable deadline is unavailable or not itemized; and
(iii) Any additional expenses incurred as a result of the
mortgagee's failure to comply with the timeframe.
(3)(i) Regardless of the review type, if FHA determines that the
mortgagee's claim included expenses incurred after the expiration of a
timeframe listed in paragraph (u)(1) of this section, FHA may, in its
discretion:
(A) Reduce the amount of insurance benefits paid to the mortgagee;
or
(B) Demand for repayment of all expenses that were not curtailed by
the mortgagee.
(ii) FHA may offset any future claims made by a mortgagee if the
mortgagee does not satisfy any demand for repayment under paragraph
(u)(3)(i)(B) of this section within 30 days of the date FHA issues the
demand for repayment.
0
6. Revise the heading of Sec. 203.474 to read as follows:
Sec. 203.474 Additional limitation on claim submission for
rehabilitation loans secured by other than a first mortgage.
* * * * *
Dated: May 11, 2015.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2015-16479 Filed 7-2-15; 8:45 am]
BILLING CODE 4210-67-P