The U.S. Department of Housing and Urban Development (HUD) on Tuesday announced that it has awarded a new Single Family Secretary-Held Loan Servicing contract to Information Systems & Networks Corporation (ISN) on a host of single-family forward mortgage programs. However, the current arrangement involving Secretary-Held Home Equity Conversion Mortgage (HECM) loans and HECM subordinate mortgages will remain unchanged with NOVAD Management Consulting, according to an FHA informational notice.
Beginning on October 9, ISN will become responsible for servicing partial claim subordinate mortgages; Section 235 subordinate mortgages; Nehemiah subordinate mortgages; Emergency Homeowners Loan Program (EHLP) subordinate mortgages; Asset Control Area (ACA) mortgages; Hope for Homeowners (H4H) subordinate mortgages; and Good Neighbor Next Door (GNND) subordinate mortgages.
“This transfer of servicing does not affect to whom borrowers make their primary mortgage payments,” HUD explained in the announcement. “Borrowers should continue to make their primary mortgage payments to the entity listed on their monthly mortgage statement.”
While the discussion around the current arrangement for HECM servicing has been a source of debate within the industry and among issues in the prior presidential administration, HUD clarifies in its announcement that the current arrangement regarding HECM loans is unaffected by Tuesday’s announcement regarding other FHA single-family programs.
“NOVAD Management Consulting (NOVAD) will remain responsible for servicing Assigned Secretary-Held Home Equity Conversion Mortgages (HECM) and HECM Subordinate Mortgages,” HUD said.
NOVAD was first named the HECM Servicing Contractor in 2014. Documents released alongside the main budget proposal from the White House by the U.S. Department of Housing and Urban Development (HUD) earlier this year give the first substantive indication of the Biden administration’s perspectives on the HECM program, including about the performance of the Mutual Mortgage Insurance (MMI) Fund, and the ability for HECM to generate economic receipts for the federal government.
The idea that the Secretary-held portfolio continues to grow in size and commensurate cost has contributed to calls from both industry observers and participants concerning the need for HUD to designate a new HECM servicing contractor. The need certainly exists for a competent servicer to address the growing costs associated with servicing the portfolio. Still, another cost-saving measure could be maintaining the current servicer, according to perspectives shared with RMD by Former Deputy Secretary of HUD Brian D. Montgomery earlier this year.
“Given the increase in portfolio size, the cost of Servicing the portfolio has grown significantly as well, and the need to have a competent Servicer to handle the size and scale is also very important,” Montgomery told RMD in June. “One possible solution for the increase in costs of HECM servicing is to keep the Servicing with the existing Servicer. It reduces the unnecessary friction for borrowers of having to deal with a new servicer, creates consistency in the program, and I believe, will ultimately reduce overall costs for the HECM program.”
Read FHA’s informational notice concerning the new servicing contractor for non-HECM single-family mortgage programs.