One of the best things about the advent of the internet age is that people, companies, and now even the government are able to crowdsource information for everything from problems to programs. No longer the exclusive province of hackers and developers, the crowdsourcing game has now spread to almost all levels of society, including previously remote agencies of government like HUD and FHA.
The Federal Register released a proposed rule last week for the Federal Housing Administration (FHA) entitled Strengthening the Home Equity Conversion Mortgage (HECM) Program. It was a supplemental notice of proposed rulemaking which seeks to solicit comments from the public about one particular previous comment from said public which the administration is seriously contemplating enacting.
“On June 23, 2016, a public commenter brought to HUD's attention a suggested change to the HECM program's policy that grants the mortgagee the option to assign a HECM loan to FHA if the outstanding loan balance is equal to or greater than 98 percent of the maximum claim amount. The commenter stated that, in some cases, a mortgagee may decline to file a claim in this scenario if the property value has risen rapidly and the loan has an above-market rate. The commentator concluded that lenders in this way have a “put option” and “can choose to keep the best loans and make claims for the worst ones”. In order to address this issue, the commenter suggested that HUD require that an assignment claim be made when the loans reach 98 percent of the maximum claim amount.”
HUD is now seeking public comments on the feasibility of this proposal because they are considering whether to adopt it. The public comment period is open for 30 days as of August 9th of 2016. You can contribute your own voice through the Federal eRulemaking Portal here.