FHA floats change to tax, insurance reimbursement in claims

The Federal Housing Administration is proposing a measure designed to address a timely pain point in the claims reimbursement process for mortgages it insures.

Under the change the Department of Housing Development agency posted Thursday, the FHA would give servicers the option of getting reimbursed for property tax and insurance advances at an earlier point in the process.

The proposal is timely because the wait for reimbursement has grown more painful in the many areas where T&I costs are rising.

The Community Home Lenders of America said Thursday that its members would like to see it move forward.

"This capability could enhance lender liquidity," Scott Olson, the CHLA's executive director, said in a press release.

But even if the relief gets approval, companies will have to wait for it because of the operational adjustments that would be necessary, the FHA warned.

"Please note that if FHA finalizes this policy, it will take significant time to implement, as FHA will need to update its claims system," the administration warned in an information bulletin.

The FHA will be accepting feedback on the proposal through March 3, 2025.

The overall increase in property taxes has slowed on a near-term basis in the past year but it's still has been running at a historically high rate of almost 9%, according to a National Association of Home Builders report published in late June.

Last year, homeowners insurance rates rose nearly 19%, according to an industry study.

Some jurisdictions have passed ballot measures aimed at providing property tax relief but not all of these have passed or provided significant breaks to consumers.

The FHA's proposal follows closely on the heels of updates to servicing reimbursements in the government-sponsored enterprise market.

Fannie Mae announced on Wednesday  that it is raising the bar for certain types of foreclosure and bankruptcy attorney reimbursement for matters active as of on Jan. 1 with mandatory use starting April 1.