FHA to open eNote submissions for partial claims

The Federal Housing Administration will begin accepting electronic submissions of partial claim documents in 2025, marking another step in digitization for government housing agencies.

The FHA announced its plan for a demonstration, or pilot, this week in a new notice, indicating it will permit lenders to submit partial claim promissory notes and subordinate mortgages electronically to the agency in lieu of original forms. The demonstration will become effective on a future date following a review and comment period, after which implementation guidance will also be provided, and will run for at least five years. 

"The main goal of the demonstration is to reduce the costs and burdens for mortgagees associated with the mailing and tracking of original PC documents," FHA said in the notice. 

The review period closes on Feb 3, with comments accepted either through the federal eRulemaking portal or by mail. 

Under the proposal, the lender or mortgagee would be required to submit an electronic copy of a partial claim note within 60 days of execution to the Department of Housing and Urban Development, which oversees the FHA. An electronic version of the recorded partial claim mortgage would also be due to HUD within six months, with the lender retaining original documents for a designated required time period. 

"HUD will allow all mortgagees to participate in the demonstration, where state and local law permits," the notice also said.

The latest news marks another step toward digital adoption within the mortgage industry, particularly at government agencies. Earlier this year, HUD began accepting electronic promissory notes alongside paper documents in the same securitization pools of Ginnie Mae-guaranteed loans.

HUD similarly cited the cost savings of eNotes behind the decision to allow commingling, which was long sought after by many in mortgage banking. Ginnie Mae first began accepting full eNote pools in 2021. ENote adoption has also gained traction in private-label secondary markets. 

The new development also follows other recent announcements by HUD aimed at streamlining processes and removing some of the obstacles faced by lenders and borrowers applying for FHA-backed loans. 

In a separate letter last month, HUD said it would seek to standardize application forms used for its Title I program covering manufactured housing and property improvement products. The proposal would permit usage of the industry standard Uniform Residential Loan Application, which would be completed by borrowers along with a HUD-specific addendum. A comment period for that particular proposal closes on Dec. 18. 

HUD is also seeking comments for a change to underwriting rules that would permit borrowers to include anticipated revenue from renters in the collateralized home as income. The deadline for comments to the underwriting rule is Dec. 10.