The Federal Housing Administration (FHA) this week published a new draft version of a Mortgagee Letter (ML) containing a series of proposed changes to the Home Equity Conversion Mortgage (HECM) program to the Single Family Drafting Table, an online portal designed to gather stakeholder input on proposed guidance before implementation.
The new draft ML primarily contains proposed changes focused on reverse mortgage servicing. Stakeholder feedback is due by Nov. 7.
Core HECM proposals
Six major proposals feature in the document. One proposal gives reverse mortgage servicers the ability to verify property occupancy by phone, designed to ease the process of contacting seniors for their required annual occupancy check.
If enacted, outstanding homeowner’s association (HOA) fees, where applicable, would join the calculation of a repayment plan for any reverse mortgage borrowers behind on their obligations including the payment of taxes and/or homeowner’s insurance.
Other proposals include expanding “the ability of mortgage servicers to work with borrowers who are behind on their property tax or hazard insurance by an amount up to $5,000 without calling the mortgage due and payable;” as well as allowing servicers “to assign a HECM to HUD after the servicer has funded a cure for a borrower’s delinquent financial obligations.”
This proposal applies only as long as the borrower has already made all required property charge payments for one year, and all other assignment eligibility criteria are met.
Finally, the proposal would also “streamline requirements for executing alternatives to foreclosure and updating existing incentive payments for successful completion of loss mitigation options;” while also providing a new incentive payment to servicers for completing foreclosure alternatives.
HUD, industry response
“At HUD, we’re constantly working to enhance, update, and streamline our key programs to make them accessible and easy to navigate for those we serve,” said HUD Secretary Marcia Fudge in an announcement of the proposed changes. “We urge the public to provide us feedback on our new proposed changes to Home Equity Conversion Mortgages, so we can best benefit seniors, their families, and lenders.”
FHA Commissioner Julia Gordon alluded to the imminent publication of this draft ML during her remarks at the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Expo in Nashville. She indicated that the proposals are indicative of the priority HUD, FHA and the Biden administration have placed on strengthening the HECM program.
“The HECM program remains one of the cornerstone programs on the market to help seniors who want to stay in their own homes as they age,” Gordon said. “These proposals benefit seniors with HECM mortgages as well as their families, and they also facilitate participation in the program by HECM lenders.”
NRMLA is setting up a working group of subject matter experts to submit comments to the agency by the deadline according to an email update to its membership.