This week, the Federal Housing Administration (FHA) issued an informational notice to remind servicers of both forward and Home Equity Conversion Mortgages (HECMs) that relief options are available for borrowers impacted by recent natural disasters.
The wildfires that swept across the island of Maui and decimated the town of Lahaina have encouraged FHA to remind mortgagees that there are different types of relief measures and rules that apply when servicing traditional and HECM mortgages in presidentially-declared disaster areas.
Disaster relief
“HECMs that become due and payable for reasons other than the death of the last surviving borrower and eligible non-borrowing spouse are subject to a 90-day extension of HECM foreclosure timelines,” FHA said in regards to HECM relief.
Disasters also impact the timeline on when a foreclosure can commence again after suspension.
“In [Presidentially-Declared Major Disaster Areas (PDMDAs)], FHA provides HECM mortgagees an automatic 90-day extension from the date of the PDMDA foreclosure extension expiration date to commence or recommence a foreclosure action,” FHA said.
FHA also reminded mortgagees that they should contact borrowers impacted by these disasters as soon as possible, while encouraging mortgagees to use “any permissible means” to contact borrowers and provide forbearance relief.
“Because of the extensive destruction in Maui and disruption to modes of communication unique to the island, mortgagees may offer and provide the forbearance unless the borrower affirmatively declines the offer,” FHA said.
The dispersed landscape of Hawaii
The dispersed nature of homes on the Hawaiian islands could prove problematic for contacting impacted borrowers, especially due to the noted impact on communications and internet access caused by the disasters.
Reverse mortgage industry professional Wendy Oshiro, who spoke with RMD about the realities of originating on the islands in 2019, described some of the ways that homes — and home values — are widely dispersed.
“There are a number of unique types of housing in Hawaii that other states may not have to deal with such as Ohana Dwelling Units, single-family homes in condominium property regimes, and lava zones on the Big Island,” Oshiro told RMD in 2019. “We also have a high number of multi-generational households, because living in paradise can be expensive.”
Hawaii also comes with some unique physical and topographical challenges according to Barbara Welsh, who then served as a Honolulu-area reverse mortgage professional.
“We run into the challenges of being in rural areas,” Welsh said in 2019. “Once you’re outside [of population centers], do you have a private road maintenance agreement? Is everything built to HUD standards? Things are a little more unforgiving, but each island does have its own challenges.”
Other recent disaster declarations
President Biden issued a disaster declaration for Hawaii on August 10, but several other states have seen similar declarations in August alone due to the ongoing impacts of adverse weather events.
Severe storm and flooding in July led the president to issue a disaster declaration in New Jersey on August 11. June’s storms, straight-line winds and tornadoes led to such a declaration for the state of Mississippi on August 12, and a similar disaster declaration stemming from April’s severe flooding in Montana came that same day. Storms and flooding from late June and early July led to a disaster declaration for Illinois on August 15.
Recently, the State of Hawaii expanded its participation in the Homeowners Assistance Fund to include reverse mortgage borrowers who may require assistance with paying property taxes or homeowner’s insurance in the wake of the COVID-19 pandemic. The state is also currently seeking allegedly unpaid taxes from bankrupt industry lender Reverse Mortgage Funding.
According to HECM endorsement data provided to RMD by Reverse Market Insight (RMI), the State of Hawaii has recorded 136 units over the past 12 months with an average maximum claim amount of $839,541. 23 of those loans originated on the island of Maui, which had a higher average max claim of just under $899,000.
