HUD Withdraws Proposal to Establish Claim Filing Deadline

By: Krista Cooley, Kathryn Baugher

Servicers of mortgage loans insured by the Federal Housing Administration (“FHA”) can breathe a sigh of relief—at least for now. Today, the U.S. Department of Housing and Urban Development (“HUD”) withdrew part of a recently proposed regulation that would have required FHA-approved servicers to file a claim for FHA insurance benefits within a certain period of time or else face termination of the FHA insurance policy. HUD stated that it withdrew the proposal to establish a claim filing deadline “[i]n response to public comments expressing concern over the implementation of the proposed provisions[.]”

The proposal in question was published on July 6, 2015, and raised serious questions and concerns for lenders that service FHA-insured loans. Had the proposal been implemented, it could have had a chilling effect on FHA lending, to the detriment of the borrowers served by the FHA program. Fortunately, HUD appears to have reconsidered the wisdom of imposing a claim filing deadline at this time. If HUD decides to pursue a claim filing deadline in the future, it will publish a new proposed rule in the Federal Register and solicit public comment again at that time.

Notably, the withdrawal announced today applies only to the portion of the July 6th proposed regulation that would have established a claim filing deadline. The remainder of the proposed regulation, which would provide for pro rata curtailment of debenture interest incurred as a result of a mortgagee’s delay and also require curtailment of additional expenses when a mortgagee misses certain deadlines, was not withdrawn.

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