The Federal Housing Administration (FHA) finalized changes to the claims process for home equity conversion mortgages (HECM), also known as reverse mortgages. The change will allow for faster payment of funds to mortgagees when a HECM is assigned to the U.S. Department of Housing and Urban Development (HUD).

“In consideration of recent market conditions that have impacted the HECM program, the FHA is making program enhancements to improve market stability and reaffirm its commitment to the senior citizen population that is served by the HECM program,” a mortgagee letter stated.

The updates expedite the process by allowing people with FHA mortgages to submit a request for preliminary title approval earlier in the process and with fewer documents. This will reduce the amount of time between a loan’s eligibility for assignment to HUD and the payment of claim funds to the mortgagee.

Prior to this change, mortgagees could submit a request for assignment when the HECM loan balance equaled or exceeded 97.5 percent of its maximum claim amount (MCA). For adjustable rate HECMs, the time between this threshold and 98 percent, when the assignment to HUD could be made, has decreased because of increased interest rates. To compensate, FHA expanded the assignment claim submission window to begin at 97 percent MCA to support timely payment of assignment claims and provide greater flexibility in HECM portfolio management.

“The Home Equity Conversion Mortgage program is an important resource for the nation’s senior homeowners who wish to age in place,” Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon said in a release. “Today’s changes simplify processes and pay mortgagee claims more quickly, providing meaningful relief to program participants as they navigate the unique challenges of today’s economic environment.”

FHA also announced it will allow mortgagees to submit original notes and mortgages after assignment claim payment as opposed to before.