Extended Maui foreclosure relief covers HECM borrowers

Parts of the island were devastated by wildfires this past August, virtually destroying the town of Lahaina

The Federal Housing Administration (FHA) this week extended a moratorium on foreclosures on the island of Maui as the community continues to deal with the fallout of devastating wildfires that swept across it in August and destroyed an estimated 80% of the town of Lahaina according to CBS News.

The relief, detailed in Mortgagee Letter (ML) 2023-19, extends to the island’s Home Equity Conversion Mortgage (HECM) borrowers. As a Presidentially-Declared Major Disaster Area (PDMDA), an automatic 90-day moratorium was instituted following the declaration, but that was set to expire on Nov. 8.

“Due to the extent of the devastation from the wildfires and the unique geographic location of Maui, making recovery more difficult, HUD is extending the foreclosure moratorium,” the ML explained. “HUD believes that borrowers need the additional time provided by the moratorium to access federal, state, or local housing resources and consult with HUD-approved housing counselors.”

The moratorium specific to HECM foreclosures is now scheduled to expire on May 6, 2024.

The HECM foreclosure moratorium is applicable under two scenarios: “only if the HECM is due and payable for reasons other than the death of the last remaining borrower and is not subject to a deferral period; and to the initiation of foreclosures and foreclosures already in process,” the ML said.

Lenders are granted an automatic 180-day extension for all servicing deadlines during the moratorium period, including for instances that accelerate a loan to due and payable status. There is also an additional 180-day extension after the end of the moratorium to commence or recommence a foreclosure, or to evaluate a borrower for certain loss mitigation options.

“Where foreclosure has not been initiated, the [lender] may submit a request for an extension to HUD’s foreclosure-related deadlines through Home Equity Reverse Mortgage Information Technology (HERMIT) when prohibited from performing a required activity due to the foreclosure moratorium,” the ML said.

In August, FHA reminded lenders and servicers of both forward and reverse mortgages that relief options are available for borrowers impacted by recent natural disasters.

At that time, FHA also reminded lenders that they should contact borrowers impacted by these disasters as soon as possible while encouraging them to use “any permissible means” to contact borrowers and provide forbearance relief.

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