Ahead of the impending roll-out of the Home Equity Conversion Mortgage final rule on September 19, the Department of Housing and Urban Development provided updated servicing guidance in a mortgagee letter released late Thursday.
Mortgagee Letter 2017-11 contains three main servicing points regarding defaults, the sale of a home associated with a due-and-payable HECM, and Cash for Keys transactions.
HUD updated its guidance on the timeframe for due-and-payable requests regarding money advanced to cover property charges: Once a borrower responds to a notification that he or she had not met the mandatory loan obligations, the mortgagee has 30 days to issue a full due-and-payable request. If the borrower never responds to the initial warning, the mortgagee then must send the request 30 days after the first letter was sent.
Sale of Property
The mortgagee letter codifies that borrowers or their families can sell the home for a minimum of 95% of the property’s appraised value once a HECM becomes due and payable.
“This guidance announces to the industry the amount the Commissioner will accept when a borrower, eligible non-borrowing spouse, borrower’s estate, or borrower’s heir is satisfying a due and payable HECM for less than the total loan balance,” the letter reads.
Cash for Keys
Finally, the letter specifies that mortgagees can receive up to $3,000 from HUD for the reimbursement of Cash for Keys and other relocation incentive payments — as long as the mortgagee had paid out an incentive to the borrower, another party authorized to handle a deed-in-lieu transaction, or a “bona fide tenant who vacated the property prior to an eviction being initiated by the mortgagee.”
The new guidelines take effect for case numbers assigned on or after September 19, the same day the final rule takes effect. HUD invited industry participants to provide comment over a 30-day period beginning Thursday via the email@example.com e-mail address.
Read the full mortgagee letter here.
Written by Alex Spanko