FHA Issues Temporary Reverse Mortgage Program Waivers Due to Pandemic

The Federal Housing Administration (FHA) on Friday announced the issuance of two partial waivers which apply to the Home Equity Conversion Mortgage (HECM) program due to the ongoing effects of the COVID-19 coronavirus pandemic.

These waivers allow mortgagees to be more flexible in submitting HECM assignment claims without borrower signatures, as well as reviewing borrowers for subsequent repayment plans for unpaid property charges, regardless of the total outstanding money owed that has not yet been paid (arrearage).

The new waivers come on the heels of other recently-extended relief which applies to the HECM program and its borrowers, including for exterior-only property appraisals as the United States is contending with a new wave of coronavirus infections across the country.

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HECM assignment signature waiver

The first waiver pertains to the requirement to obtain a signature from a HECM borrower on an occupancy certification for a HECM-liened property. The waiver is described as applying to guidance handed down by Mortgagee Letter (ML) 2017-05, which consolidated policy found in various previously-existing MLs and handbooks for mortgagees submitting HECM assignment requests by initiating a Claim Type 22 (CT-22) in HUD’s Home Equity Reverse Mortgage Information Technology System (HERMIT).

“A temporary partial waiver of Mortgagee Letter 2017-05 that allows Mortgagees to submit a CT-22 Assignment Claim without having to obtain a signature from the HECM borrower on an occupancy certification,” the official waiver request reads. “Mortgagees must continue to obtain the HECM borrower’s annual certification but are not required to obtain a signed occupancy certification. This temporary waiver on obtaining signatures will be in effect through December 31, 2020.”

The waiver was requested by Matt Martin, director of the U.S. Department of Housing and Urban Development (HUD)’s National Servicing Center (NSC).

“HECM borrowers are experiencing significant difficulties due to the COVID-19 National Emergency,” the justification of the waiver reads. “This includes recommendations from public health officials for all individuals, but especially those over age 62 or with preexisting health conditions, to maintain physical distance from all others not residing in their home. Following these recommendations has caused difficulties for HECM borrowers in traveling to carry out routine tasks such as receiving and sending mail.”

The waiver is prudent since many of those difficulties being faced by vulnerable populations, including seniors, directly affects the abilities of many HECM borrowers to send and receive important pieces of documentation, the justification says.

“This temporary partial waiver is necessary because of difficulties HECM borrowers are experiencing in being able to receive and return mail during the COVID-19 Presidentially Declared National Emergency,” the document reads. “As all HECM borrowers are age 62 or older, and this population is at high risk due to the COVID-19 pandemic. Mortgagees must continue to obtain the HECM borrower’s annual certification but are not required to obtain a signed occupancy certification during the period of this temporary waiver.”

Unpaid property charges waiver

The second waiver, also requested by Director Martin, applies to original guidance handed down in ML 2015-11 which applied to HECMs that default for tax and insurance. The 2015 ML saw FHA permit the mortgagee to take a one-time extension to submit a due and payable request.

“A temporary partial waiver of Mortgagee Letter 2015-11, that allows the Mortgagee to offer a Repayment Plan for unpaid property charges to HECM borrowers regardless of the total outstanding arrearage,” the waiver justification says in describing the original guidance. “[The waiver would apply to] the phrase ‘if the outstanding arrearage is less than $5,000’ in bullet point 1 and waiv[e] in its entirety bullet point 2 of Section D (Unsuccessful Repayment Plan Performance) under the section of the Mortgagee Letter entitled ‘Option 1: HECM Loss Mitigation Repayment Plan.’ This waiver will remain in effect through December 31, 2020.”

While also citing the difficulty seniors are facing due to the pandemic, the specific ability for HECM borrowers to make timely payments under the terms of their individual repayment plans is also affected, the justification reads.

“Given these constraints, HECM borrowers are unable to send repayment plan payments to their servicers timely in many cases,” the justification reads. “Under existing policy, when a borrower fails to make two consecutive payments on a HECM repayment plan [then] the plan fails. Servicers can only offer the borrower a new repayment plan where the borrower’s total arrearage is less than $5,000. Because borrowers are unable [to] deliver their payments to servicer[s] timely due to COVID-19 related issues, this waiver would ensure that mortgagees can provide the borrower with another repayment plan.”

The waiver will provide relief for seniors who fail to meet the “two consecutive payments” standard of the original guidance, extending an earlier waiver designed to answer this need that was set to expire on Friday, the justification says.

“This partial waiver will allow borrowers to repay property tax arrearages of any amount if the borrower is unable to make two consecutive payments during the COVID-19 National Emergency,” the justification says. “This partial waiver builds on the previous partial waiver dated April 14, 2020, which expires on October 30, 2020. This partial waiver has an effective date through December 31, 2020 as the conditions warranting the partial waiver are still impacting HECM borrowers.”

The latest guidance from FHA comes as the United States is seeing a new wave of coronavirus infections sweeping across the country. The U.S. recorded over 500,000 new, confirmed cases of coronavirus infection over the past week according to reporting at the New York Times, and stocks were on track Friday to finish out their worst week since March, when the COVID-19 outbreak was officially declared a pandemic by the World Health Organization (WHO), according to Bloomberg News.

Read the FHA INFO notice describing the issuance of the new waivers.

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