HUD Withdraws Proposal to Limit FHA Insurance Claim Period

Responding to concerns expressed by ABA and others, the Department of Housing and Urban Development today published a notice withdrawing a portion of its proposal limiting the window under which an FHA-approved lender would be able to file a mortgage insurance claim.

Under the withdrawn portion of the proposal, lenders would have been required to file a claim within three months of securing title to a home post-foreclosure or after selling it to a third party. In addition, lenders would have been unable to file claims more than 12 months after the end of HUD’s “reasonable diligence timeframe,” which varies state by state. Failure to file timely claims would have resulted in termination of the FHA insurance contract.

ABA had opposed the proposal in a comment letter, calling it unworkable and warning that the unrealistic deadlines and overly harsh penalty would discourage lender participation in the FHA program.