On November 10, 2004 HUD published several proposed rule changes to its Single Family Mortgage Insurance Program. The time period for public comment expired on January 10,2005.

With FR-4831-F-02 the Dept. of HUD revises its regulations under the single family mortgage insurance program that govern actions by mortgagees with respect to mortgages in default.

Following are the original proposals and final rules (Effective November 1st,2007);

Escrow for Condominium and Homeowner Association Fees
Proposal:

• To require a provision in the mortgage for the payment by the mortgagor of homeowner or
  condominium association fees.
• To require mortgagees of FHA-insured mortgages endorsed on or after the effective date of the final rule to collect, as part of the monthly mortgage payment, an escrow of the amounts necessary for the payment of these fees when they become due.
• To require the mortgagor to assign part of the monthly payment for condominium or homeowners' association fees.

Final Rule:
Based on public comments received, HUD has determined that a mandatory escrow requirement for condominium and homeowners association fees is not feasible. Therefore, HUD has removed
the corresponding homeowner and condominium association fee provisions that were proposed at Sec.  203.402(a) and (j).

FHA Mortgage Claim Procedures
Proposal:

• Require that the deed to the Secretary must be recorded within 30 days after the later of the acquisition of possession of the property by the mortgagee or the expiration of the redemption period.
• Amend procedures for the payment of pre-foreclosure claims. Specifically, to amend Sec.  203.370 to provide for the payment of insurance benefits by the Secretary in a pre-foreclosure sale of the property if, among other things, ``the mortgagor has received an appropriate
  disclosure, as determined by the Secretary.''
• To require that, along with the existing requirements that must be satisfied for payment of a partial claim, the mortgagor must have made a minimum number of monthly payments, as
  prescribed by the Secretary.
• To require that HUD must receive the original of the note and security instrument no later than 60 days after the date of the execution of the note and the security instrument.

Final Rule :
In response to industry comments, HUD has determined that it will be difficult in some jurisdictions to be able to receive the recorded, original security instrument from the recording authority and ensure that they are received by HUD within 60 days from execution. Accordingly, HUD has revised Sec. 203.371(d) to provide that HUD must receive the original credit instrument no later than 60 days after the date of execution and the recorded, original security instrument not later than 6 months after the date of execution. Where the mortgagee is experiencing a delay from the recording authority, it may request an extension of time from HUD.

Although HUD proposed to amend Sec.  203.359(b)(2) to revise the timing requirements for direct conveyance procedures, it has determined not to proceed with this change in this final rule. As proposed, the revision provided that the deed to the Secretary must be recorded within 30 days after the later of the acquisition of possession of the property by the mortgagee or the expiration of the redemption period.
After further review, HUD believes that additional investigation is needed before establishing the revised time frame. Therefore, HUD is considering further change and clarification for the timing of direct conveyancing procedures and may issue new time frames in a future rulemaking.

FHA Title Requirements
Proposal:

• Add ``aviation easements'' approved by the Secretary at the time of the mortgage origination to
  the list of easements in paragraph (b)(1) to which the Federal Housing Commissioner may not raise objection in taking title to property covered by an insured mortgage in default.

Payment of Insurance Benefits
Proposal:

• Incorporate new items that would be included in insurance benefits paid by HUD with
  respect to conveyed and non-conveyed properties. Specifically, in paragraph (a), an amount may be included in the claim payment of a utility fee, if it is a lien prior to the mortgage.
• Amend the language that would permit HUD to reimburse mortgagees for payments of homeowners' association and condominium fees if,because of a default of a mortgagor in making escrow payments, the mortgagee has to pay these fees.
• Eliminate the need for approval by the Secretary,prior to the issuance of a mortgage, of a covenant that provides for charges and fees for the administration, operation, and maintenance of community-owned property.
  

Mortgagee Actions and Forbearance
Proposal:

• Eliminate the requirement of a face-to-face meeting if the mortgaged property is within 200 miles of the mortgagee or a branch office thereof.
• Clarify the deadline for the mortgagee to complete its loss mitigation evaluation by requiring the mortgagee to evaluate, before the account becomes four payments due and unpaid, all of the loss mitigation techniques provided in Sec.  203.501 to determine which, if any, is appropriate and to reevaluate monthly thereafter.

Final Rule :
In consideration of the comments received, HUD has determined that the requirement of face-to-face meeting requires additional consideration. As aresult, HUD is planning a comprehensive revision that will revise Sec.203.604. Because HUD determined that the face-to-face meeting requirement should be reconsidered in a new proposed rule, this final rule does not effectuate the revisions to Sec.  203.604(c)(2) that were contained in the proposed rule.

After publication of the proposal to clarify the deadline for the mortgagee to complete its loss mitigation evaluations a change to Sec.  203.605 was promulgated in the final rule entitled, ``Treble Damages for Failure to Engage in Loss Mitigation'' published in the Federal Register on April 26, 2005, at 70 FR 21572. Because the proposed change to Sec. 203.605 has already been codified, HUD will not be revising Sec. 203.605 in this final rule.

For additional information servicers are to contact
 Ivery Himes, Director, Asset Management and Disposition Division
Department of Housing and Urban Development
 451 Seventh Street, SW., Room 9172
Washington, DC 20410-8000
Telephone (202) 708-1672

To view the full document including industry comments to the proposals along with the HUD responses, please click on the following links. 

HUD Revisions to the Single Family Mortgage Insurance Program - Word

HUD Revisions to the Single Family Mortgage Insurance Program - PDF

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