The Department of Housing and Urban Development today released new and revised HECM servicing Frequently Asked Questions, including new guidelines regarding the sale of a HECM property after the borrower has left the home or passed away.
“When a HECM loan becomes due and payable as a result of the mortgagor’s death and the property is conveyed by will or operation of law to the mortgagor’s estate or heirs, that party may satisfy the HECM debt by paying the lesser of the mortgage balance or 95% of the current appraised value of the property,” as stated in the FAQ.
Previously, the heirs were required to pay the full loan balance in order to assume the title of the home, whereas others in an arms-length transaction were permitted to purchase the home for 95% of the current appraised value.
The change comes following guidance that was rescinded by HUD in April, and was an issue brought to the attention of HUD and the Court in a lawsuit filed against HUD by AARP. The case was dismissed without prejudice on July 15.
Additional servicing practice changes, revised as of July 19, are also outlined in the FAQ, including those regarding foreclosure eviction, repayment timeframe allowance, and others.
View the HECM Servicing FAQs.
Written by Elizabeth Ecker