The Federal Housing Administration (FHA) published a new proposal this week Mortgage letter up Single-family drawing tablewhich would bring mortgagors and mortgagors on the same page in their understanding of how much is owed on a partial claim.
Partial claims are intended to provide relief to mortgage borrowers who have fallen behind on their monthly payments, allowing them to become current without affecting the terms of their original loan. FHA will pay a portion of the delinquent amount as a foreclosure mitigation measure, and the amount paid by FHA will become a subordinate lien on the property.
Partial claims do not themselves require new monthly payments, but the amount must be repaid when the home is sold or refinanced, or when the loan is fully paid off.
“With this draft ML, HUD seeks to ensure that borrowers, closing agents, attorneys, and title agents are aware of the amount of the subordinate lien owed on the partial claim by ensuring that the partial claim payout is provided to the party receiving asks for the FHA payout statement. -insured first mortgage,” the agency said.
FHA believes this new process can help “minimize losses to the FHA Mutual Mortgage Insurance (MMI) Fund and avoid potential challenges associated with the subordinate lien for those refinancing their mortgage or selling their home. In addition, this ML proposes to partially alleviate the operational burden [lenders] by extending the time allowed for filing a partial claim.”
The two core provisions of the proposed guidance would establish a new process in which lenders would obtain partial claim payment statements from the U.S. Department of Housing and Urban Development (HUD)’s Single Family Mortgage Asset Recovery Technology (SMART) Integrated Portal (SIP), and would then “provide it when receiving a payout request for an existing FHA-insured mortgage,” according to the announcement.
The proposal would also extend the time frame for lenders to “record partial claim security instruments from 5 to 15 days,” FHA said.
Stakeholders are invited to submit their comments on the proposal until October 10.
HUD first launched a new portal for the SMART System in early 2022, which was designed to allow borrowers and servicers to request real-time payout amounts for FHA partial claims or subordination checklists typically used in FHA refinance transactions.
