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FHA extends COVID-19 reverse mortgage relief once more

The FHA is extending relief beyond the pandemic emergency due to benefits for borrowers and mortgagees

The Federal Housing Administration (FHA) announced on Friday that it is extending the COVID-19 relief, which includes mortgage forbearance and a Home Equity Conversion Mortgage (HECM) extension relief, in order to meet the needs of lenders and borrowers. The new deadline will be May 31, 2023.

In Mortgagee Letter (ML) 2023-08, the FHA notes that while the COVID-19 forbearance and HECM extension relief has been extended numerous times, this may be the final extension, as the end of the presidential declaration regarding the pandemic emergency is set to end in mid-May.

HECM relief extended

In ML 2020-06, issued in April 2020, the FHA initially instructed HECM loan servicers to delay due and payable requests for an initial period of six months for borrowers requesting relief.

“Pursuant to the COVID-19 National Emergency, upon request of the Borrower, the Mortgagee must delay submitting a request to call a loan due and payable,” a HECM provision in the original guidance states. “The Mortgagee must waive all Late Charges, fees, and penalties, if any, as long as the Borrower is in an extension period.”

Due to the wave of stay-at-home orders and restrictions on non-essential businesses, the FHA noted that relief to keep people in their homes was a top priority.

“The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy,” now-former HUD Secretary Ben Carson said at that time. “If you’re struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation.”

The relief provisions for forbearances and HECM extensions were to be periodically reviewed and given additional extensions of roughly six months at a time — until the publication of ML 2021-24, which tied the relief to the duration of the presidentially-declared emergency instead.

End in sight

The White House announced in January that the presidentially-declared COVID-19 emergency will come to an end on May 11, as will a number of relief provisions. Still, abruptly ending the emergency could cause new disruptions.

“[A]n abrupt end to the emergency declarations would create wide-ranging chaos and uncertainty throughout the health care system — for states, for hospitals and doctors’ offices, and, most importantly, for tens of millions of Americans,” the White House said.

That is also true for the mortgage loans administrated by the federal government, according to the new ML.

“As the National Emergency may end earlier than originally expected, HUD has determined that a short period beyond the expiration of the COVID-19 Presidentially Declared National Emergency would be beneficial to both FHA Borrowers and Mortgagees,” the new ML states. “This extension is intended to provide affected Borrowers ample time to request a COVID-19 Forbearance or HECM Extension, and for Mortgagees to offer and process these requests.”

As a result, the FHA is extending the period for both forms of relief until May 31, which it said will “align COVID-19 Forbearance and HECM Extension requests with the monthly billing cycle.”

However, this relief and its timing provisions do not interact with the COVID-19 recovery and loss mitigation options laid out in ML 2023-03, and no HECM extension period may go beyond November 30, according to the announcement.