The Federal Housing Administration (FHA) announced today that it has issued two new temporary, partial waivers to policies under the Home Equity Conversion Mortgage (HECM) program in order to expand the ability for affected seniors to react and respond to the circumstances wrought by the COVID-19 coronavirus pandemic.
Building on similar waivers issued in 2020 and 2021, the new partial waivers relate to two Mortgagee Letters (MLs) issued in 2015 and 2016, respectively.
The first waiver is related to ML 2015-11, and allows mortgagees to offer repayment plans related to unpaid property charges. The second is tied to ML 2016-07, and permits assignment of a HECM loan to HUD during the three-year period after a lender had advanced funds for a delinquency cure during the pandemic period.
Unpaid property charges waiver
The waiver was requested by Matt Martin, director of the U.S. Department of Housing and Urban Development (HUD)’s National Servicing Center (NSC).
Partially waiving ML 2015-11 “allows the Mortgagee to offer a Repayment Plan for unpaid property charges to HECM borrowers regardless of the total outstanding arrearage, by waiving the phrase ‘if the outstanding arrearage is less than $5,000,’” Martin writes in his request. It also waives the “Unsuccessful Repayment Plan Performance” section of the ML.
Martin describes HECM borrowers as a “particularly vulnerable population” in his justification for the request, and that the cohort continues to experience significant hardship stemming from the pandemic.
“Such difficulties include but may not be limited to, health concerns, decreased income, as well as reduced mobility due to public health guidance,” he writes. “Given these circumstances, HECM borrowers are often unable to send timely repayment plan payments to their servicer. Under existing policy, when a borrower fails to make two consecutive payments on a HECM repayment plan, the plan fails and servicers may only offer the borrower a new repayment plan where the borrower’s total arrearage is less than $5,000.”
Since these particular borrowers are not able, in many cases, to make timely payments to servicers, this allows the servicers themselves to evaluate impacted borrowers for a new repayment plan without having to consider total arrearage. The waiver was signed off on by Julienne Joseph, deputy assistant secretary for single-family housing, and will remain in effect through December 31, 2022.
HECM assignment waiver
The second waiver, also requested by Director Martin, applies to guidance handed down in ML 2016-07, which “permit[s] assignment of a HECM to HUD during the 3-year period after a Mortgagee advances funds for a mortgagee-funded cure where delinquency occurred on or after March 1, 2020,” the relief description says.
Also requested by HUD NSC Director Martin and signed off by Deputy Assistant Secretary Joseph, this waiver also seeks to address additional needs of borrowers which have been negatively impacted by the pandemic in other ways, and cites the ways in which borrowers may be affected which is identical to the language of the first waiver.
“Given these circumstances, HECM borrowers exiting a COVID-19 Extension period are often unable to send timely taxes and insurance payments,” Martin writes. “Under existing policy, a HECM will not be eligible for assignment during the 3-year period after a mortgagee-funded cure. The mortgagee may not seek assignment for such a HECM until 3 consecutive years have passed where the borrower has paid all taxes and insurance on time and the mortgagee has not advanced any funds on the borrower’s behalf.”
Keeping that in mind, this waiver makes it possible for mortgagees to seek assignment for a HECM to HUD immediately following a cure to the outstanding payment issues provided by the mortgagee, the justification says.
“This waiver will provide relief for borrowers by allowing mortgagees to use their own funds to cure a tax or insurance default while passing none of the costs onto the borrower,” the justification reads. This waiver is also in effect through December 31, 2022.
Pandemic support continues, Biden HECM history
The waivers issued today echo similar waivers that were put out by FHA in September of 2021. In guidance specifically to reverse mortgage borrowers, FHA is imploring that financially impacted borrowers contact their loan servicer immediately if they require assistance through one of these outlined extensions.
Shortly after the inauguration of President Biden in late January, HUD issued updates to guidelines surrounding forbearance requests for mortgage borrowers who have been impacted by the pandemic, and the extension of a moratorium on foreclosures and evictions that was first handed down by President Donald Trump and Former HUD Secretary Dr. Ben Carson at the beginning of the pandemic.
A newer factor at play in the Biden administration’s COVID relief strategy for reverse mortgage borrowers is the $10 billion Homeowners Assistance Fund (HAF), a program introduced with the passage of the American Rescue Plan Act into law. HAF is available to reverse mortgage borrowers who may have become delinquent on outstanding property taxes or homeowner’s insurance payments, but reverse mortgage servicers recently described for the industry that uptake from borrowers has been slow going due to issues in bringing 50 disparate state programs online.
Read the notice of the refreshed waivers at HUD.