FHA proposes updates to HECM program

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Orrick, Herrington & Sutcliffe LLP

On November 1, the Federal Housing Administration (FHA) proposed updates to FHA’s Home Equity Conversion Mortgage Program that are intended to address a number of servicing issues where existing program requirements have conflicted with HUD’s policy objectives.  FHA is requesting public feedback. Key changes include the following:
  • Allowing mortgage servicers to contact borrowers by phone to verify occupancy for the program’s required annual occupancy certification;
  • Allowing outstanding homeowner’s association dues to be included in the calculation of a repayment plan for borrowers who are behind on their HECM financial obligations;
  • Expanding the ability of mortgage servicers to work with borrowers who are behind on their property tax or hazard insurance by an amount up to $5,000 without calling the mortgage due and payable;
  • Allowing mortgage servicers to assign a HECM to HUD after the servicer has funded a cure for a borrower’s delinquent financial obligations so long as the borrower has made all property charge payments for one year and all other assignment eligibility criteria are met;
  • Streamlining requirements for executing alternatives to foreclosure and updating existing incentive payments for successful completion of loss mitigation options; and
  • Providing a new incentive payment to mortgage servicers for completing these alternatives.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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