Updates to the MPF Property Loss Events and Insurance Loss SettlementsEffective Date: Immediately (unless otherwise noted)
The MPF Program has simplified the guidelines for handling property loss events and insurance loss settlements by clarifying disbursement requirements. For Government Loans, PFIs must comply with all requirements of the applicable Government Agency.
Release of Insurance Proceeds
The thresholds requiring authorization prior to disbursement have been clarified to apply to Insurance Proceeds rather than Property Damages.
Additional guidance as to what Servicers must consider when making disbursement decisions has been added.
Mortgage Loans Current or Less Than 31 Days Delinquent
If the loan is current or less than 31 days delinquent, written prior approval is now only required prior to release of insurance proceeds that exceed $40,000. The Servicer is now authorized to release an initial disbursement up to the greater of:
- 33% of the Insurance Proceeds; or the amount by which the released funds exceed the sum of the UPB, accrued interest, and advances on the Mortgage Loan.
The Servicer must disburse any remaining funds based on periodic inspections of the progress of the repairs.
Mortgage Loans 31 Days or More Delinquent
If the Mortgage Loan status is 31 days or more delinquent at the time of the loss event, the Servicer is authorized to disburse Insurance Proceeds without obtaining prior approval if the Insurance Proceeds are:
- less than or equal to $5,000, the Servicer is authorized to make the disbursement in one payment.
- greater than $5,000, the Servicer must:
- release an initial disbursement of insurance loss proceeds of 25% of the total Insurance Proceeds but no more than $10,000, and
- must disburse the remaining funds in increments not to exceed 25% of the Insurance Proceeds following inspection of the repairs.
For a better understanding of these updates, see Chapter 4-Insurance Requirements of the applicable MPF Product Guide.