Once again, the Federal Housing Administration has issued additional guidance related to the Mortgagee Optional Election assignment for Home Equity Conversion Mortgages (HECMs).
Last Friday, the Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2016-05, which provides alternative certification language for certain states whose statute of limitations requirements prohibit a mortgagee from truthfully completing the Mortgage Certification required to be signed at the time of assignment, per ML 2015-15 under the Mortgage Optional Election (MOE) Assignment for HECMs with FHA Case numbers assigned prior to August 4, 2014.
Under ML 2016-05, HUD states mortgagees may now request an extension of 30 days to the 120-day assignment requirement provided the sole reason a mortgagee is unable to submit the assignment request within the 120-day requirement is due to the state’s statute of limitations (i.e. preventing the mortgagee from truthfully certifying to the Mortgagee Certification found in ML 2015-15); and therefore, the mortgagee will certify using the alternate language provided in ML 2016-05.
“FHA has been advised that certain states’ probate procedures may impede a Non-Borrowing Spouse’s ability to obtain legal title or establish the legal right to remain in a property securing a HECM prior to the deadline for a mortgagee to complete its assessment following its MOE Assignment election,” states ML 2016-05.
“Therefore, the purpose of this Mortgagee Letter is to provide mortgagees with instructions on requesting an extension of time where factors (i.e., wholly outside of the control of a Non-Borrowing Spouse and a mortgagee) prevent the timely securing of a right to remain by the Non-Borrowing Spouse, and result in the mortgagee’s inability to complete the abovementioned assessment timely.”
Where a mortgagee is unable, due to state law requirements, to truthfully certify to item 3 in the Mortgagee Certifications, the optional language that may be used is as follows:
“At assignment, there is a valid, legally enforceable first lien with no impediments to securing good, marketable title; and upon first assignment, the Secretary will have a valid, legally enforceable first lien with no impediments to securing good and marketable title,” states ML 2016-05.
Additionally, where a mortgage is unable, due to state law, to certify using the aforementioned language as it is written, the mortgagee may use the language below in lieu of the last sentence in the Mortgagee Certification:
“Further, I hereby agree on behalf of the Mortgagee that it will indemnify the Secretary for any amounts paid pursuant to this election in the event the Secretary is subsequently impeded from obtaining good and marketable title as a result of the Secretary’s inability to enforce a valid, legally enforceable first lien.”
Read HUD Mortgagee Letter 2016-05.
Written by Jason Oliva