The Federal Housing Administration (FHA) will allow alternative documentation options and delayed documentation delivery deadlines for Home Equity Conversion Mortgage (HECM) lenders that have been affected by the COVID-19 coronavirus pandemic, effective immediately for all assignment claims submitted on or before October 30, 2020. This is according to Mortgagee Letter (ML) 2020-12, released by FHA on Tuesday afternoon.
Due to the widespread effects of the national emergency related to the coronavirus, the suspension of many non-essential operations and additional guidance from authorities related to social distancing have created difficulties for lenders in obtaining the necessary documentation to obtain FHA claim payments, and to submit required documents on schedule.
Overview, trade association response
The guidance issued by the new ML was praised by the National Reverse Mortgage Lenders Association (NRMLA) as providing necessary additional relief for the reverse mortgage industry during a difficult emergency.
“The workflow associated with the HECM assignment process is detailed and complicated, and this workflow has been frustrated by the challenges presented by the COVID-19 virus,” said NRMLA President Steve Irwin in a statement to RMD. “NRMLA and its members are grateful for the actions taken by HUD via this mortgagee letter to help facilitate a more effective and efficient assignment process.”
The possibility of the claim payment process being interrupted by the effects of the national emergency could be critical according to FHA, one of the primary reasons that this guidance has been issued.
“Because timely claim payment is critical in ensuring that HECM borrowers receive their loan proceeds in accordance with program requirements and guidelines, the U.S. Department of Housing and Urban Development (HUD) is issuing this guidance to provide HECM mortgagees with additional flexibilities during the COVID-19 National Emergency,” the ML reads in part.
Specifically, the ML makes three key exceptions that apply to HECM lenders during the national emergency: there is now alternative documentation available for specific HECM assignment claim requirements; there is an extension of time to deliver original notes and mortgages to the HUD Secretary; and there is extension of time to deliver recorded assignments of mortgage to the HUD Secretary for HECMs with case numbers assigned prior to September 19, 2017.
Alternative documentation types for assignment claims
“Some documentation required for payment of a CT-22 Assignment Claim is currently difficult or impossible to obtain given COVID-19 related closures around the country,” the ML reads regarding previously-required documents for HECM assignments. Several additional documents are now permitted during the duration of the national emergency to qualify as evidence of eligibility for an assignment claim payment.
The alternative documentation types 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.
“All other assignment claim documentation requirements remain in effect,” the ML reads. “If at any point, HUD identifies that any assignment criteria were not met at the time of claim payment, the Mortgagee must resolve the issue(s) or repurchase the HECM […].”
Delayed deadlines for original notes and mortgages
The ML also permits lenders an extension of time to deliver the original note and mortgage because of complications the national emergency has caused in making timely delivery under normal circumstances.
In order to receive claim payment after receiving approval to assign from HUD (but prior to HUD receiving the original note and mortgage) lenders must upload a copy of the note endorsed to the HUD Secretary, with visible endorsement information, into the Home Equity Reverse Mortgage Information Technology (HERMIT) system. Lenders must also complete the timeline step in HERMIT “Original Note and Mortgage Sent to HUD,” and enter step note “Documents Delayed COVID-19” into the HERMIT timeline.
Lenders are allowed to use this extension to deliver the original note and mortgage as soon as possible, but no later than 12 months from the date of the claim payment, FHA advises.
“For HECMs with an FHA case number assigned before September 19, 2017, mortgagees may also utilize an extension of time to deliver recorded assignments of Mortgage to the Secretary as soon as possible but no later than 12 months from the date of claim payment,” the ML reads. However, if the original note and mortgage are not provided within that time frame, the lender must repurchase the HECM loan within 30 days of receiving a defect notice from the Department.
Read ML 2020-12 at HUD.