Law360, New York ( September 16, 2015, 11:24 AM EDT) -- Earlier this summer, the U.S. Department of Housing and Urban Development published a proposed rule that, at first glance, appeared to respond to complaints from servicers of government-insured loans that they should not be penalized for pursuing foreclosure avoidance options or experiencing delays in the legal system beyond their control. Currently, if a servicer fails to foreclose quickly enough within artificially created state time lines, the servicer forfeits all accrued interest when the servicer files a claim with HUD for mortgage insurance benefits. HUD's proposal would change the Federal Housing Administration' single family mortgage insurance claim filing process to pro rate the curtailment of interest in mortgage insurance claims based on actual delays caused by the servicer. So far, so good. However, HUD did not stop there. HUD also proposed the complete extinguishment of an FHA insurance policy — the loss of both principal and interest — if the servicer does not file a claim for insurance benefits within a new set of artificial time lines. On balance, few servicers would call this proposal progress....