FHA Extends Foreclosure Moratorium, Expands Relief for Reverse Mortgage Borrowers

The U.S. Department of Housing and Urban Development (HUD) on Tuesday released a Mortgagee Letter (ML) with a number of housing provisions across all of the Federal Housing Administration (FHA)’s single family housing programs, including the Home Equity Conversion Mortgage (HECM) program. These include an additional extension of the foreclosure and eviction moratoria first announced early last year, and an extension of the required deadlines to up to 180 days from the end of the moratorium.

The actions are being taken in order to facilitate keeping as many people affected by the economic damage caused by the COVID-19 coronavirus pandemic as possible in their homes in an attempt to mitigate additional health and financial risks that have come from the sprawling crisis, according to a statement issued on Tuesday morning by the White House.

“These critical protections were due to expire in March, leaving many at risk of falling further into debt and losing their homes,” the White House statement reads in part. “Now, homeowners will receive urgently needed relief as we face this unprecedented national emergency. Today’s action builds on steps the President took on Day One to extend foreclosure moratoriums for federally guaranteed mortgages.”

Extension of foreclosure and eviction moratoria

The moratoria on foreclosures and evictions have been extended an additional 90 days to June 30, 2021, according to the publication of ML 2021-05.

“As President Biden has made clear, it is urgent that we help homeowners throughout the nation who are struggling financially from this unprecedented national emergency,” said Acting HUD Secretary Matthew Ammon in a statement announcing the extension. “The steps we are taking today will provide both immediate relief to those in desperate need of assistance and help more homeowners keep their homes and resume their payments when the pandemic subsides.”

The moratorium, first instituted nearly a year ago by the administration of President Donald Trump and most recently extended to the end of March on the first day of President Joe Biden’s administration, prohibits servicers from initiating or proceeding with foreclosure and foreclosure-related eviction actions for HUD-insured or guaranteed single-family forward and reverse mortgages. The only exception is for arrangements secured by legally vacant and abandoned properties.

This latest guidance marks the fifth time that the moratorium on foreclosures and evictions has been extended by HUD, based on the publication of four previous MLs issued in 2020 and 2021, marking something of a collaborative effort between the Trump and Biden administrations.

Deadline extension

The new letter also extends options for reverse mortgage borrowers in forbearance, providing up to two additional three-month COVID-19 forbearance periods or HECM extension periods for certain borrowers. The HECM extensions apply to loans being called due and payable, 

HUD also requires mortgage servicers to provide up to six months of forbearance when a borrower experiencing a financial hardship due to the ongoing effects of the pandemic requests such assistance. An additional six months of forbearance for a borrower who requests an extension is also available.

“For Borrowers who requested their initial extension period on or before June 30, 2020, the Borrower may request, and the Mortgagee must approve, up to two additional three-month extension periods,” the new guidance reads for HECM loans not yet in “due and payable” status. “The Borrower must request each three-month extension individually. Neither of the two additional three-month extension periods may extend beyond December 31, 2021. No extension period may extend beyond June 30, 2022.”

Additionally, mortgagees are required to notify HUD of any additional extension periods by submitting an extension request through the Home Equity Reverse Mortgage Information Technology (HERMIT) system, the ML reads.

For HECM loans which have reached due and payable status, new guidance specifies that the borrower may request or the mortgagee may take two additional three-month extension periods.

“If a Borrower requests the additional three-month extension periods, the Mortgagee must approve them,” the ML reads. “The Borrower must request each three month extension individually. Neither of the two additional three-month extension periods may extend beyond December 31, 2021. No extension period may extend beyond June 30, 2022.”

The statement posted from the White House also specifically mentions the importance of addressing needs for a wide pool of borrowers, including those with a reverse mortgage.

“Communities large and small need this assistance. That is why the Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture worked in concert to deliver across-the-board relief for urban, suburban, rural, and military homeowners, including seniors with reverse mortgages,” the statement reads in part.

ML 2021-05 published on Tuesday updates the effective date of the HECM delay as originally published to June 30, 2021. The original delay for calling a HECM due and payable was handed down last April by the Trump administration, in ML 2020-06.

Industry, HUD response

The additional relief for reverse mortgage borrowers as a result of this guidance is welcomed by the reverse mortgage industry’s trade association, the National Reverse Mortgage Lenders Association (NRMLA).

“NRMLA and its members are grateful for the extension of the Moratorium until June 30, and applaud the extension of the required deadlines to up to 180 days from the end of the Moratorium,” said NRMLA President Steve Irwin in an email to RMD. “These actions will enable our servicer members to more fully engage with those HECM borrowers who may need additional time to resolve any lingering issues.”

A spokesperson for HUD also tells RMD that the actions outlined in the ML today are being taken specifically because the Department recognizes the need that certain seniors with reverse mortgage loans have that are stemming from the COVID-19 pandemic.

“Many homeowners with FHA-insured mortgages continue to struggle financially because of COVID-19, and they desperately need assistance,” the HUD spokesperson told RMD. “This includes seniors with FHA-insured Home Equity Conversion Mortgages. To assist seniors with HECMs, today FHA has extended the timeframe for the start of an initial COVID-19 HECM extension through June 30, 2021. For HECMs that entered an initial extension period on or before June 30, 2020, up to two additional three-month extension periods are available.”

Read Mortgagee Letter 2021-05 at HUD.

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