FHA Points New Waivers for Reverse Mortgage Debtors Impacted by Pandemic
The Federal Housing Administration (FHA) announced Thursday that it has issued two partial waivers that will apply to the Home Equity Conversion Mortgage (HECM) program due to the ongoing impact of the COVID-19 coronavirus pandemic.
These waivers allow borrowers to screen for future repayment schedules for unpaid real estate fees regardless of the total outstanding amount that has not yet been paid (arrears), as well as the ability for mortgage holders to apply for a HECM loan assignment to the Department of Housing and Urban Development (HUD) immediately after using their own funds to pay unpaid property taxes and insurance on or after March 1, 2020.
This new form of relief comes just about a month after the FHA phased out a moratorium on foreclosures that has been in place since the pandemic began. However, the same guidelines also stated that evictions due to foreclosures would remain on hold until the end of September 2021. One of the exemptions announced this week had already been introduced once at the end of 2020.
Unpaid real estate fees: a second waiver
The first exception is to the original guidance given in ML 2015-11 that applied to HECMs that do not provide tax and insurance benefits. The 2015 ML provided for the FHA to allow the mortgagee a one-time renewal to submit a due and payable application.
“[The relief sought is a] temporary partial waiver of 2015-11 mortgage letter, which allows the mortgagee to offer HECM borrowers a repayment schedule for unpaid real estate fees regardless of the total outstanding arrears by using the phrase “if the outstanding arrears are less than $ 5,000” in bullet points 1 and waiver in full on item 2 of Section D (unsuccessful fulfillment of the repayment schedule) under the section of [ML] with the title ‘Option 1: HECM Loss Mitigation Repayment Plan’ ”, says the waiver.
The waiver was requested by Matt Martin, director of the National Servicing Center (NSC) of the US Department of Housing and Urban Development (HUD). The purpose of the waiver is in the ongoing difficulties faced by seniors with reverse mortgages stretching out of the pandemic, according to the waiver’s “Employee Justification”.
“HECM borrowers continue to experience significant difficulties due to the COVID-19 pandemic. Such difficulties include, among other things, health concerns, loss of income and restricted mobility due to advice in the area of public health, ”the explanatory statement stated. “Given these circumstances, HECM borrowers are often unable to send their amortization plan down payments to their servicer in a timely manner. Under the existing policy, if a borrower fails to make two consecutive payments under an HECM repayment plan, the plan will fail and servicers will only be able to offer the borrower a new repayment plan if the borrower’s total arrears are less than $ 5,000.
Since borrowers have been able to make payments on time through COVID-19, this waiver allows reverse mortgage service providers to evaluate such affected borrowers in order to set a new repayment schedule regardless of the total arrears.
This new version of the waiver builds on the previous issue of a similar waiver in February and expires on December 31, 2021.
Waiver of Assignment
The second waiver issued deals mainly with the guidelines handed down in ML 2016-07, which “allow”[s] Assigning a HECM to HUD during the 3 year period after a mortgagee advances funds for a mortgage-funded cure that defaulted on or after March 1, 2020, ”the discharge description reads.
This waiver, also requested by HUD NSC Director Martin, and signed by Deputy Assistant Secretary for Single Family Housing Julienne Joseph, also aims to meet the additional needs of borrowers who have otherwise been adversely affected by the pandemic .
“Such difficulties include, among other things, health concerns, loss of income and restricted mobility due to guidelines in the area of public health,” it says in the explanatory memorandum. “Given these circumstances, HECM borrowers who exit a COVID-19 extension period are often unable to make tax and insurance payments in a timely manner. Under the existing policy, a HECM is not eligible for assignment during the 3 year period after a mortgage-funded cure. The mortgagee cannot apply for assignment for such an HECM until 3 consecutive years have passed in which the borrower has paid all taxes and insurance on time and the mortgagee has not advanced any funds on behalf of the borrower. “
With this in mind, this waiver enables mortgage creditors to apply for the assignment of a HECM to the HUD immediately after the outstanding payment problems provided by the mortgagee are healed, the explanatory memorandum states.
“This waiver will relieve borrowers by allowing mortgage creditors to use their own funds to heal a tax or insurance loss without passing the cost on to the borrower,” the statement reads.
In contrast to the first announced waiver, this will last longer and, according to the official document, has an expiration date of June 30, 2022.
Need for More Pandemic Assistance, Recent History
These latest moves follow additional relief granted by the HUD following President Biden’s inauguration, including updated forbearance requests in late January for mortgage borrowers affected by the pandemic and the extension of a moratorium on foreclosures and evictions, first introduced by President Donald Trump and the former HUD secretary Dr. Ben Carson at the start of the pandemic. In July, the FHA announced that it would extend a moratorium on evictions specifically related to foreclosures for a further 30 days until the end of September 2021, but the previously extended moratorium on foreclosures will expire at the end of July. This emerges from the publication of the Mortgagee Letter (ML) 2021-19.
In late July, the FHA reiterated several facilitation options available to mortgage borrowers to roll back, and the service providers of FHA-insured HECMs were reminded that they must offer an extension to homeowners suffering financially from COVID-19 if the homeowner requests such assistance. The FHA extended the time frame for homeowners to request an extension from their mortgage administrator through September 30, 2021.
The FHA also previously extended the maximum allowable time frames for COVID-19 renewals based on the date of the original application. For all requested extensions from March 1, 2020 to June 30, 2021, there is both an initial extension period of six months and an additional extension period of up to a further six months for those who request this. For extensions requested between July 1 and September 30, 2021, only the initial extension period of up to six months is permitted. There is no additional period of six months available for such borrowers.
In addition, as outlined by the FHA, no extension period may go beyond June 30, 2022 under the repeated guidelines.
In a guide specifically for mortgage borrowers, the FHA requires financially affected borrowers to contact their loan service provider immediately if they need help with any of these outlined extensions.
Read the FHA’s informational notice regarding the latest HECM program waivers.