Researchers Urge Dept. HUD and FHA to Reform Foreclosure Penalty Structure

Servicing costs continuously haunt the Federal Housing Administration-backed loan costs, which caused a group of researchers to suggest a reformation of the the Department of Housing and Urban Development's foreclosure penalty structure.

"The key difference between FHA and GSE foreclosures, the team wrote, lies in the timing of penalties," according to Reverse Mortgage Daily.

"The FHA assesses fines for missed deadlines during the foreclosure process, which accrue until the property turns over to HUD — regardless of whether the individual mistakes actually held up the overall foreclosure process."

Researchers are suggesting a bit more flexibility and cited GSE foreclosures as a possible structure to consider. The report states that "GSEs don't assess penalties for for individual missed deadlines as long as the overall timeline is met."

“This approach grants servicers more flexibility to tailor their work to accommodate operational challenges or borrower circumstances,” the team wrote, according to RMD.

“This flexibility is useful during periods of high delinquencies, when servicing operations are already under duress.”

To learn more about the suggested reform for FHA and HUD and foreclosure penalty structure, click on the image above.

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