On Tuesday, the Department of Housing and Urban Development (HUD)  announced changes to the Federal Housing Agency’s (FHA) Claims Without Conveyance of Title (CWCOT) program. 
Changes proposed by HUD include:
- Providing for a second appraisal once a property becomes vacant
- Expanding the number of states for marketing services and auction services into the judicial states
- Modifying the “haircut” structure in a manner more specific to the value of that property
- Changes to reimbursement for property preservation and eviction expenses
“We think these changes will improve the take-up rate of the CWCOT program, which has already gone from 25% to 75%,” said Dror Oppenheimer, Senior Advisor to the Assistant Secretary for Housing—Federal Housing Commissioner at HUD during an industry event on Tuesday. “We think this is going to expand way beyond the 75% and provide real benefit for servicers and the FHA. We look forward to hearing back from the industry.”
Michael Drayne, acting EVP of Ginnie Mae, said during the event that the most important thing Ginne Mae can do to modernize our platform is to “break pool-level functions into loan-level functions.”
“This is an enormous undertaking for us, it’s a long-term proposition. This will affect almost everything about the architecture of the programs we already have and will take a number of years to complete,” Drayne said.
Ed Delgado, President and CEO of Five Star Global (parent company of both DS News and the NMSA), said, “These proposed CWCOT changes represent a major victory for homeowners. Increased utilization of CWCOT where appropriate not only limits loss exposure and provides additional savings for the MMI Fund, it also benefits communities by preserving the condition and accelerating the sale of foreclosed properties. These changes will further encourage servicers to participate in the CWCOT program, help keep more people in their homes, and provide a substantial, systemic benefit for homeownership.”
In 2018, Delgado penned an op-ed for DS News about why CWCOT is good for homeowners, and proposed several changes that could help improve the program for all stakeholders. You can read that piece by clicking here .
“I was happy to see the positive changes to the CWCOT program that will help communities, servicers, and the FHA Fund,” said Wes Iseley, Senior Managing Director at Carrington Mortgage Holdings. “The National Mortgage Servicing Association provided feedback and data to support the changes.”
FHA’s CWCOT program pays insurance benefits to a mortgagee after the sale of a property to a third-party after the foreclosure of the FHA-insured mortgage or through a second-chance sale. There is no conveyance of the property to HUD with CWCOT in exchange for payment of mortgage-insurance benefits. The program also expedities the disposition of foreclosed properties and reduces the amount of time a property sits vacant.
“The impact on servicers, neighborhoods, and the economic strength of the FHA MMI fund can not be overstated. This was a massive undertaking by the FHA and required a near metaphysical change in their perceptions of patience and perseverance,” said Tim Rood, Head of Industry Relations at SitusAMC and the Chairman of The Collingwood Group, a SitusAMC company. “Our hope is that these critical changes to the CWCOT program will pave the way for additional policy changes in the servicing space to better align FHA policies with those of the GSEs.”
Changes to the CWCOT program have been a top priority for industry organizations such as the National Mortgage Servicing Association (NMSA). Over the past year, leadership from NMSA have met with officials from the U.S. Department of Housing and Urban Development about the CWCOT program. In advance of this announcement, the NMSA sent a letter (linked here ) to HUD requesting that it take the following steps:
- Re-value properties in the program; incorrect values on occupied properties hamper the effectiveness of CWCOT
- Expand the first-chance sales footprint nationwide
- Update the haircuts, which have not been adjusted in several years
With a membership comprising more than 90% of the mortgage servicing market, the NMSA is a nonpartisan organization driven by senior executive representation from the nation’s leading mortgage servicing organizations, formed for the purpose of effecting progress and change on the key challenges that face the mortgage servicing industry. By bringing together decision making executives from across the nation, the NMSA drives the conversation on shaping the American housing industry for the benefit of homeowners.
The NMSA is supported by associate members Auction.com, DIMONT, and National General Lender Services.You can find more information about these newly proposed changes on FHA’s Single Family Housing “Drafting Table”  website, as well as a link to the CWCOT Feedback Submission Form.