In a move to streamline and speed up the payment process for home equity conversion mortgage (HECM) claims, the Federal Housing Administration (FHA) announced on Monday that it was revising the requirements for HECM servicers when they assign FHA-insured reverse mortgages to the agency for payment.
“Streamlining the HECM claim payment process makes us more responsive to participating lenders and helps continue our effort to put the program on a more financially viable path,” said FHA Commissioner Brian Montgomery.
The FHA said that its new claims payment requirements would ensure that lenders participating in the program were not unduly burdened while seeking claims payments when the HECM reaches 98 percent of its claim amount.
Under the new requirements, FHA-approved HECM servicers can use alternative supporting documents instead of previously required materials that, in many instances, delayed claim processing. Giving details of this process in the mortgagee letter issued by it, the agency said that it would accept the changed documents from servicers under the new guidelines if they were filing for evidence of current hazard insurance, alternative evidence of the death of a borrower, and evidence of completion of required repairs.
For hazard insurance, the letter said that the U.S. Department of Housing and Urban Development (HUD) would accept a document from the hazard insurance provider on its letterhead that included information such as the name of the insured, the address of the insured property, and the type of coverage.
In case of the death of a borrower, the letter said that if a servicer was unable to obtain a copy of the deceased borrower's or co-borrower's death certificate, HUD would also accept alternative evidence of the death "for purposes of Claim Type 22 review, such as an obituary or documentation from a health care institution."
The letter also offered clarifications on requirements for servicers filing for mobile home titles and current taxes, along with the time frame for filing a claim following preliminary title approval.