FHA Addresses Outstanding Questions for Coronavirus Reverse Mortgage Relief

The Federal Housing Administration (FHA) on Wednesday addressed a series of commonly-asked questions from stakeholders related to recent guidance the agency has issued, aimed at providing relief for reverse mortgage borrowers that have been affected by the COVID-19 coronavirus pandemic. This is according to an agency-led webinar that was held on Wednesday.

In addition to recapping the measures that have been taken by FHA and the U.S. Department of Housing and Urban Development (HUD) as stated in recent Mortgagee Letters (MLs), FHA also answered a series of recurring questions related to the effects that the borrower relief efforts may have on lenders while the COVID-19 national emergency is in effect.

Borrowers who may not occupy the property when requesting relief

One of the borrower relief provisions outlined in ML 2020-06 states that mortgagees must delay calling a reverse mortgage due and payable for a period of up to 6 months, if an affected borrower requests such relief. An additional 6 months can also be approved by HUD for situations that may call for it, according to the ML.

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This provision also applies to borrowers who may be affected by the current emergency even if they may not reside within the property, according to HUD’s Stacey A. Brown.

“Mortgagees must delay submitting a request to call the HECM due and payable upon request of the borrower impacted by the COVID-19 national emergency,” Brown said on the webinar in direct response to a scenario in which a borrower may no longer reside in the property.

Servicers and forbearance of HECM borrowers

Additionally, even if the loan has already been called due and payable with HUD approval, servicers are required to give a HECM borrower a forbearance if that borrower has requested one as a result of the national emergency.

“HECM servicers must follow the provisions of the CARES Act requiring a forbearance upon request of the borrower for all federally insured mortgages,” Brown said. “FHA has provided servicers with an extension to all foreclosure and claim deadlines for loans that have become due and payable with HUD approval during the COVID-19 national emergency.”

That extension covers any required forbearance time period as laid out by the CARES Act, and provides servicers with additional time to take certain actions to meet FHA guidelines, she added.

Evidence required for delay of due and payable request, assignment claim documentation

In terms of what the mortgagee must hold on to in order to substantiate a request that a borrower makes to delay submission of a due and payable request during the emergency, FHA specifies that there are no specific documentation requirements. However, mortgagees should still maintain the same kinds of servicing notes that they would during a normal transaction, with some additional information related to the specifics of the borrower’s delay request.

“There are no documentation requirements for this extension,” Brown said on the webinar. “But FHA encourages Mortgagees to maintain complete servicing notes including information regarding the borrowers’ request.”

The agency also reiterated that in accordance with ML 2020-12, alternative documentation types that will be accepted for HECM claim assignments during the emergency period (as long as they are dated before October 30) include a report from a tax monitoring service indicating that property taxes are not delinquent as proof that the borrower’s taxes are current; a statement from a lender that HOA or Condominium dues are not delinquent; and an emailed or verbal certification from a borrower of that borrower’s occupancy of the property as their primary residence in lieu of the annual occupancy certification typically signed by the borrower.

“Nothing in mortgagee letter 2020-12 modifies eligibility for claim payment at the time of submission of the assignment,” Brown said. “All assignment claim requirements remain in effect. […] If at any point, HUD identifies that all assignment criteria were not met at the time of claim payment, the mortgagee must resolve the issue or repurchase the loan as described in Mortgagee Letter 2020-12.”

HUD has also created an online resource designed to offer specific guidance related to issues that stem from the coronavirus emergency, including information for both borrowers and lenders as well as resources designed for other stakeholders.

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