The Federal Housing Administration (FHA) on Thursday announced the issuance of two partial waivers which apply to the Home Equity Conversion Mortgage (HECM) program due to the ongoing effects of the COVID-19 coronavirus pandemic.
These waivers allow for the review of borrowers for subsequent repayment plans for unpaid property charges, regardless of the total outstanding money owed that has not yet been paid (arrearage), as well as permitting mortgagees to seek the assignment of a HECM loan to the U.S. Department of Housing and Urban Development (HUD) immediately after using their own funds to pay unpaid property taxes and insurance on or after March 1, 2020.
This new form of relief arrives just about one month after FHA allowed a moratorium on foreclosures to expire, which had been in place since the beginning of the pandemic. However, that same guidance also detailed that evictions which stem from foreclosures would remain suspended until the end of September 2021. One of the waivers announced this week had also been instituted once previously late in 2020.
Unpaid property charges: a second waiver
The first waiver applies to original guidance handed down in ML 2015-11 which applied to HECMs that default for tax and insurance. The 2015 ML saw FHA permit the mortgagee to take a one-time extension to submit a due and payable request.
“[The relief sought is a] temporary partial waiver of Mortgagee Letter 2015-11, that allows the Mortgagee to offer a Repayment Plan for unpaid property charges to HECM borrowers regardless of the total outstanding arrearage, by weaving the phrase, ‘if the outstanding arrearage is less than $5,000’ in bullet point 1 and waiving in its entirety bullet point 2 of Section D (Unsuccessful Repayment Plan Performance) under the section of the [ML] entitled ‘Option 1: HECM Loss Mitigation Repayment Plan,’” the waiver reads.
The waiver was requested by Matt Martin, director of the U.S. Department of Housing and Urban Development (HUD)’s National Servicing Center (NSC). The purpose of the waiver is due to the ongoing difficulties endured by seniors with reverse mortgages extending from the pandemic, according to the waiver’s “employee justification.”
“HECM borrowers continue to experience significant difficulties due to the COVID-19 pandemic. Such difficulties include but may not be limited to, health concerns, decreased income, as well as reduced mobility due to public health guidance,” the justification reads. “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 borrowers have had their ability to make timely payments impacted by COVID-19, this waiver allows for reverse mortgage servicers to evaluate such impacted borrowers to determine a new repayment plan, regardless of the total arrearage.
This new version of the waiver builds on prior issuance of a similar waiver in February, and is set to expire on December 31, 2021.
Assignment waiver
The second issued waiver deals primarily with 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 for SIngle Family Housing Julienne Joseph, this waiver also seeks to address additional needs of borrowers which have been negatively impacted by the pandemic in other ways.
“Such difficulties include but may not be limited to, health concerns, decreased income, as well as reduced mobility due to public health guidance,” the justification reads. “Given these circumstances, HECM borrowers exiting a COVID-19 Extension period are often unable to send timely taxes and insurance payments. 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.
Unlike the first waiver announced, this one will persist for longer and has an expiration date of June 30, 2022 according to the official document.
Need for continued pandemic support, recent history
These latest actions follow up on additional relief handed down by HUD in the wake of the inauguration of President Biden, including late January 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. In July, FHA announced that it would extend a moratorium on evictions specifically related to foreclosures another 30 days to the end of September, 2021, but that the previously-extended foreclosure-specific moratorium will still expire at the end of July. This is according to the publication of Mortgagee Letter (ML) 2021-19.
At the end of July, FHA reiterated several relief options available to reverse mortgage borrowers, and servicers of FHA-insured HECMs were reminded that they are required to offer homeowners suffering financially due to COVID-19 an extension when the homeowner requests such assistance. FHA extended the timeframe for homeowners to request an extension from their mortgage servicer through September 30, 2021.
FHA also previously extended the maximum allowable timeframes for COVID-19 extensions based on the date of the initial request. For all requested extensions made from March 1, 2020 to June 30, 2021, there is both an initial extension period of six months and an additional extension period of up to another period of six months for those who request it. For extensions requested between July 1 and September 30, 2021, the initial extension period of up to six months is all that is permitted. No additional six month period is available for such borrowers.
Additionally, no extension period as outlined by FHA may extend beyond June 30, 2022 according to the reiterative guidance.
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.
Read the informational notice from FHA regarding the newest HECM program waivers.
