In an increasingly common refrain for borrowers of government-sponsored mortgages, the Federal Housing Administration (FHA) on Tuesday further extended certain mortgage relief programs including measures which apply to borrowers of Home Equity Conversion Mortgages (HECMs). These include the ability to complete exterior-only appraisals, the use of streamlined borrower employment verification measures and verification of rental income guidance.
These measures are arriving as the United States passes the grim milestone of over 500,000 deaths attributed to the COVID-19 coronavirus pandemic, though some economists are also beginning to see the possibility of greater economic activity as the number of new cases decreases while coronavirus vaccine distribution increases.
Extension of relief measures
The measures were announced in the publication of two new Mortgagee Letters (MLs) this week, ML 2021-06 and ML 2021-07. In ML 2021-06, two provisions with relevance to the HECM program are extended: the re-verification of employment status as first handed down in ML 2020-05, and the extension of availability for the exterior-only property appraisal option as first handed down in ML 2020-37.
ML 2021-06 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.
ML 2020-05 published in March, 2020 created the appraisal relief measures related to COVID-19 in order to minimize instances of contact between senior borrowers and appraisers, in light of the fact that the disease which can result from COVID-19 inordinately affects seniors according to guidance from the Centers for Disease Control and Prevention (CDC).
Originally, the guidance created the ability for HECM loans to use both exterior-only and desktop-only appraisal options, but ML 2020-37 ended the desktop-only option, citing material data indicating that it is not required to continue in pursuit of its original purpose in mitigating the spread of COVID-19.
In the original guidance for re-verification of employment on the reverse mortgage side, a year-to-date pay stub or direct electronic verification of income for the pay period that immediately precedes the note date or a bank statement showing direct deposit from the borrower’s employment for the pay period that immediately precedes the note date will be accepted.
Mortgagees do not need to provide a re-verification of employment within 10 days of disbursement as described in Section 3.8 and 3.9 of the HECM Financial Assessment and Property Charge Guide, provided that the mortgagee is not aware of any loss of employment by the borrower and has obtained either of the described documents. The continuation of re-verification of employment guidance in ML 2020-05 is effective immediately for cases closed on or before June 30, 2021, according to the newly-published ML.
In ML 2021-07, it is explained that as many companies and small businesses have had to reduce the scope of their operations due to the pandemic, less typical sources of income have been complicated especially if certain income thresholds are required to qualify for certain FHA forward and reverse mortgages, the ML explains.
“Mortgagees are therefore experiencing an additional layer of challenge as they attempt to determine income stability for self-employed Borrowers and for Borrowers who rely on receipt of rental income,” ML 2021-07 reads in part. “In recognition of these and other challenges that Mortgagees are experiencing during these unprecedented times, 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.”
Pre-recorded webinar available from FHA
Additionally, in light of the recent extension of previous relief including a moratorium on foreclosures and evictions and an extension period for HECM borrowers handed down by FHA last week, FHA servicers and other interested stakeholders can access a pre-recorded webinar which discusses the various policies outlined in ML 2021-05 in greater detail.
“Representatives from the Federal Housing Administration will review FHA’s COVID-19 Loss Mitigation Policy including: all available COVID-19 Loss Mitigation Options and the updates to FHA’s COVID-19 Loss Mitigation Policy announced in ML 2021-05, Extensions of Single Family Foreclosure and Eviction Moratorium Start Date of COVID-19 Initial Forbearance and HECM Extension Period; Expansion of COVID-19 Loss Mitigation Options,” the description of the webinar reads.
A grim milestone
The extensions of these relief measures come as the COVID-19 coronavirus pandemic continues to create economic instability for millions of Americans, with these newly-announced measures serving as another piece of visible action taking place on the heels of a grim milestone in the crisis as seen on American shores. As of Monday February 22, the United States has officially passed more than 500,000 deaths attributed to COVID-19 since the pathogen came to the country in early 2020.
The U.S. death toll is higher than any other in the world, and has surpassed some early estimates of loss made by federal health experts according to the New York Times. Though the U.S. population makes up just over 4.25% of the global population, the United States accounts for roughly 20% of the global coronavirus death toll, which is also greater than American combat casualties suffered during World War I, World War II and the Vietnam War combined, the Times noted.
Some communities, however, are beginning to see new stability in efforts to control the virus. Now that multiple coronavirus vaccines have been approved for distribution in the United States and new cases and deaths have showed signs of slowing, some local economies have begun the process of opening more broadly. Some economists are starting to see an indication that as the economy begins to open more, stockpiles of cash saved by some consumers could be ready to spend in the future.