The Federal Housing Administration (FHA) announced today that it has extended two temporary partial waivers to policies under the Home Equity Conversion Mortgage (HECM) program. The goal is to allow seniors who have been financially impacted by the COVID-19 coronavirus pandemic to seek loss mitigation options.
The first waiver, related to ML 2015-11, allows mortgagees to offer repayment plans on unpaid property charges. The second is tied to ML 2016-07 and allows a HECM loan to be assigned to HUD during the three-year period after a lender had advanced funds for a delinquency cure during the pandemic.
The new extensions push the waiver expiration dates to December 31, 2023 — one year after they were set to expire.
Unpaid property charges waiver extension
The partial ML 2015-11 waiver extension was requested by Matt Martin, director of the U.S. Department of Housing and Urban Development (HUD)’s National Servicing Center (NSC), and “allows the Mortgagee to offer a Repayment Plan for unpaid property charges to HECM borrowers regardless of the total outstanding arrearage, by waiving the phrase ‘if the outstanding arrearage is less than $5,000.’”
It also waives the “Unsuccessful Repayment Plan Performance” section of the ML.
In the request, Martin describes HECM borrowers as a “particularly vulnerable population,” noting that these borrowers continue to experience significant hardship stemming from the pandemic.
“Such difficulties include but may not be limited to, health concerns, decreased income, as well as reduced mobility due to public health guidance,” the request states. “Given these circumstances, HECM borrowers are often unable to send timely repayment plan payments to their servicer. Under existing policy, when a borrower fails to make two consecutive payments on a HECM repayment plan, the plan fails and servicers may only offer the borrower a new repayment plan where the borrower’s total arrearage is less than $5,000.”
The waiver allows servicers to assess HECM borrowers for a repayment plan despite the amount in arrears, the waiver states.
The waiver extension was signed off on by Julienne Joseph, deputy assistant secretary for single-family housing.
HECM assignment waiver extension
The second waiver extension, also requested by Martin, applies to guidance handed down in ML 2016-07, which “permit[s] assignment of a HECM to HUD during the 3-year period after a Mortgagee advances funds for a mortgagee-funded cure where delinquency occurred on or after March 1, 2020.”
Also signed off on by Deputy Assistant Secretary Joseph, the extension seeks to address additional needs of borrowers which have been negatively impacted by the pandemic in other ways, largely identical to the language of the first extension.
“HECM borrowers exiting a COVID-19 Extension period are often unable to send timely tax and insurance payments,” the extension request states. “Under existing policy, a HECM will not be eligible for assignment during the 3 year period after a mortgagee-funded cure. The Mortgagee may not seek assignment for such a HECM until 3 consecutive years have passed where the borrower has paid all taxes and insurance on time and the Mortgagee has not advanced any funds on the borrower’s behalf.”
The waiver permits mortgagees to seek assignment for a HECM in a case where funds were advanced on the borrower’s behalf during the three-year period after the loan’s cure. This can allow for “increased liquidity in HECM servicing,” according to the waiver request.
“[Increased HECM servicing liquidity] is necessary to prevent servicer defaults on making payments to borrowers,” the request states. “This change will also benefit borrowers by allowing mortgagees to use their own funds to cure a tax or insurance default while passing none of the costs onto the borrower.”
The continued need for support
The waiver extensions issued today are similar to waivers that were issued by the FHA in September of 2021. The FHA suggests that impacted reverse mortgage borrowers contact their loan servicer immediately if they require assistance through one of these outlined extensions.
Shortly after the inauguration of President Biden, HUD issued updates to guidelines surrounding forbearance requests for mortgage borrowers who have been impacted by the pandemic. It also extended of a moratorium on foreclosures and evictions that was first handed down by President Donald Trump and Former HUD Secretary Dr. Ben Carson.
One part of the Biden administration’s COVID relief strategy for reverse mortgage borrowers is the $10 billion Homeowners Assistance Fund (HAF), a program introduced with the passage of the American Rescue Plan Act. HAF is available to reverse mortgage borrowers who are delinquent on property taxes or homeowner’s insurance payments, but reverse mortgage servicers have struggled to ensure that senior borrowers know the relief is available.
Celink SVP of Customer Satisfaction Gail Balettie said on a recent episode of the RMD Podcast that reverse mortgage servicers are making progress with connecting HECM borrowers to loss mitigation programs under HAF.
“I think we have found a way to operate with the states that is finally seeing some real differences,” Balettie said. “We have collected over $2 million on behalf of senior borrowers at Celink. The HAF program was originally almost $10 billion awarded through the American Rescue Plan Act to the states. The challenge with the program is that it was like you were administering 50 different loss mitigation plans, because all of the states had different rules, different guidelines and different processes.”
Read the notice of the waiver extensions at HUD.
