How the American Rescue Plan Could Affect Reverse Mortgage Borrowers

The American Rescue Plan Act of 2021 — the COVID-19 relief legislation being spearheaded by the Joe Biden administration — will have some application to reverse mortgage borrowers, according to administration officials ahead of the vote for the act scheduled for later this week in the House of Representatives.

The legislation being debated in Congress and spearheaded by the president aims to combat the economic turmoil caused by the COVID-19 pandemic. It features $1.9 trillion of relief for Americans in the form of direct cash payments, the expansion of unemployment programs and additional funds for a national vaccination program.

While there are no specific HECM-related provisions in the recovery legislation, there is at least one component of the Act which could be applied to seniors who have borrowed through the HECM program, according to Biden administration officials: the Homeowners Assistance Fund.

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Reverse mortgages and the American Rescue Plan

The legislation contains $10 billion to create a Homeowners Assistance Fund to be distributed directly to states, tribal lands and other territories to provide assistance to people struggling with housing costs. This Fund can be applied to some of the primary fees that HECM borrowers are required to keep up with.

“The Homeowners Assistance Fund would be a way in which to provision funds to help homeowners, including seniors with HECMs, that may have back tax or insurance payments that need to be made due to hardships related to the pandemic,” an administration official told RMD. “And that would be one of the measures in which seniors and the HECM portfolio can be addressed.”

This can also be applied to other costs seniors may have difficulty meeting during the pandemic on a fixed income, including fees related to utilities.

“Utility costs, too, are some of the cover-able costs under the Homeowners Assistance Fund, which we know have proven to be challenging at this particular time for many households,” the administration official explained.

The sprawling size of the proposed legislation has many different recovery provisions as a part of the current language, and the situations of seniors have not fallen by the wayside in determining how relief can be achieved, according to administration officials.

“The issues that seniors have faced throughout this pandemic have had to remain in focus, and we’ve definitely continued to release relief,” an administration official said. “The cross-agency foreclosure and forbearance relief that we’ve put in place just last week, we have extended to our reverse mortgage borrowers and continue to look at the performance of that portfolio and continue to make sure that we’re applying and allowing policy for relief measures for seniors to flow through those broader announcements that we’ve been making related to COVID relief.”

Next steps

The currently-active legislative form of the bill, House Resolution (H.R.) 1319, was approved by the House Ways and Means Committee in early February. It was also recently approved by the Transportation and Infrastructure, Small Business, and House Veterans Affairs committees.

Earlier this week, the House Budget Committee voted 19–16 to advance the bill to the House for a floor vote, which is expected by Friday, according to House Ways and Means Committee Chairman Richard Neal (D-Mass.).

The bill has been a focus of aggressive congressional and public lobbying by the Biden administration, with the president making a number of appearances in an attempt to convince the American public of its necessity.

One of the president’s methods in appealing to the public about the American Rescue Plan includes answering questions from people via Twitter.

While the aims of the bill have been called wasteful by Republicans and too limited in scope by progressive Democrats, Democratic leadership in the House and Senate have vowed to pass the bill to make way for the president’s signature to become law.

Recent reverse mortgage relief measures

Last week, the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD) released a Mortgagee Letter (ML) with a number of housing provisions across all of FHA’s single family housing programs, including the HECM program. These include an additional extension of the foreclosure and eviction moratoria first announced early last year, and an extension of the required deadlines to up to 180 days from the end of the moratorium.

The ML also extends options for reverse mortgage borrowers in forbearance, providing up to two additional three-month COVID-19 forbearance periods or HECM extension periods for certain borrowers.

Additional relief for HECM borrowers was announced earlier this week, including extension of the ability to complete exterior-only appraisals, allowing more time for the use of streamlined borrower employment verification measures and an extension of relief for verification of rental income guidance.

One of two new MLs extends the option for using an exterior-only appraisal for HECM transactions to appraisals with an effective date on or before June 30, 2021, and is effective immediately. The new ML explains this as an extension of the provisions handed down in ML 2020-37, published last October. The other ML explained that FHA is, “temporarily updating its income requirements for self-employed Borrowers and Borrowers who rely on the receipt of rental income to qualify for an FHA-insured mortgage.”

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