In addition to providing new forbearance options for forward mortgage borrowers who continue to be impacted by the ongoing COVID-19 coronavirus pandemic, the Federal Housing Administration (FHA) on Monday announced that borrowers of Home Equity Conversion Mortgages (HECMs) will have additional relief extending from previous measures, but which also accounts for certain forward and reverse mortgage borrowers who find themselves newly affected by issues and uncertainties prompted by the pandemic. This is according to the publication of Mortgagee Letter (ML) 2021-24.
One way the new guidance attempts to accomplish this goal is by revisiting the period of relief provided, saying that previously-delineated six-month relief periods may have been insufficient particularly for those who find themselves recently affected by the economic turmoil the pandemic continues to cause.
New (and old) relief
FHA and the U.S. Department of Housing and Urban Development (HUD) continue to review policies related to pandemic relief in order to ensure that mortgage borrowers have enough options to mitigate financial hardship that has been caused by the pandemic, in addition to managing the associated risk to the Mutual Mortgage Insurance (MMI) Fund, the ML said.
Previously with the publication of ML 2020-06 in April of 2020, FHA announced an extension to the foreclosure and eviction moratorium for borrowers with FHA-insured single family mortgages for an additional period through summer 2021, as well as a further extension of the start dates of the initial COVID-19 Forbearance and HECM Extension to provide additional COVID-19 Forbearance and HECM Extension for certain borrowers.
“HUD has extended the deadlines for approval of an initial COVID-19 Forbearance and the HECM Extensions multiple times, most recently to September 30, 2021, through ML 2021-15,” the new guidance reads. “That ML only provided for a six-month period for a COVID-19 Forbearance or HECM Extension when requested between July 1, 2021, and September 30, 2021. Further, HUD understands that some Borrowers may be newly affected and may need relief through the end of the COVID-19 National Emergency.”
Since the pandemic is continuing to have an impact on both forward and reverse mortgage borrowers due in no small part to the highly-contagious Delta variant of the virus, an additional need to provide less constrained relief has been recognized by the agency.
“Our top priority is to help as many individuals and families as possible to recover from the COVID-19 pandemic and keep their homes,” said FHA Principal Deputy Assistant Secretary for Housing Lopa P. Kolluri. “For FHA, this means that we will continue to work through all of our channels – mortgage servicers, housing counselors, and our other federal partners – to ensure we get the positive outcomes struggling homeowners need.”
Additional period of relief, the emergency timetable
An additional six-month forbearance period for forward mortgage borrowers will be provided for borrowers who made an additional forbearance request between July 1 and September 30, 2021. The new reverse mortgage relief follows a similar path, according to the ML.
“HUD is also providing an additional period of up to six months for a COVID-19 HECM Extension when the initial extension request was made between July 1, 2021, and September 30, 2021,” the ML says. “This ML also establishes an initial COVID-19 Forbearance period or HECM Extension for up to six months when requested between October 1, 2021, and the end of the COVID-19 National Emergency. Further, this ML provides an additional COVID-19 Forbearance or HECM Extension period of up to six months if the initial COVID-19 Forbearance or HECM Extension is exhausted and expires during the COVID-19 National Emergency.”
The COVID-19 National Emergency, which was originally declared by Former President Donald Trump in March 2020, has been in effect ever since and it does not appear that President Joe Biden will be making any changes to the nation’s emergency posture in the near future. However, some additional insight into the emergency timetable may be gleaned from revisions the new ML makes to the Single Family Housing 4000.1 Handbook.
“No COVID-19 Forbearance period may extend beyond six months after the end of the COVID-19 National Emergency or September 30, 2022, whichever is later,” the new addition reads.
As before for HECMs which are in a due and payable status, homeowner requests for an extension must be approved by that servicer for any deadline related to foreclosure. However, for those HECM borrowers who will have made their initial relief request between October 1, 2020 and June 30, 2021, an additional six month extension period can now not be extended beyond June 30, 2022. For those newly-impacted borrowers who made their requests between July 1 and September 30, 2021, the additional period cannot go beyond September 30, 2022.
The full policy for those making their relief request between October 1, 2021 and the end of the COVID-19 national emergency allows an affected borrower to request an additional six month extension period that the mortgagee must approve, the ML reads. An additional six month period can be requested by the borrower and be approved or taken by the mortgagee if a few conditions are met.
These are if “the HECM has utilized a full six months of the initial COVID-19 Extension period; and the initial COVID-19 Extension period will expire on or before the end of the COVID-19 National Emergency,” the ML reads. “No COVID-19 Extension period may extend beyond six months after the end of the COVID-19 National Emergency or September 30, 2022, whichever is later. The maximum COVID-19 Extension period for these HECMs is 12 months.”
Other recent reverse mortgage actions taken by FHA as detailed in the publication of previous MLs and informational notices includes adding submissions for reverse mortgage appraisals to the agency’s “Catalyst” software platform; the issuance of new waivers for HECM borrowers affected by the pandemic; and an extension of an eviction moratorium.
Read Mortgagee Letter 2021-24 at HUD.