HUD Updates Servicing Guidelines

The Federal Housing Administration updated its due and payable and loss mitigation policies and procedures via the April 23 publication of Mortgagee Letters 2015-10 and 2015-11.

Mortgagee Letter 2015-10, which impacts all HECMs that become due and payable on or after July 1, 2015, provides consolidated policy guidance on:

  • How and when a HECM is considered eligible to be called Due and Payable, and the required notices servicers must execute to both the Department of Housing and Urban Development and to mortgagors (borrowers);
  • Actions servicers must take, associated timeframes and available timeframe extensions, when a HECM is eligible to be called Due and Payable; and
  • Working with HECM borrowers, heirs, estates, and Non-Borrowing Spouses when a HECM becomes due and payable.

Mortgagee Letter 2015-11 lays out permissible loss mitigation options that servicers may provide to HECM borrowers who are in technical default due to unpaid property charges, such as taxes or hazard insurance premiums.

Servicers must implement these changes immediately and will have 180 days from the date of publication to review their portfolio to bring HECM loans into compliance with the guidance in the mortgagee letter.

The policies in Mortgagee Letter 2015-11 work in tandem with those in Mortgagee Letter 2015-10. Both sets of policies support the goal of keeping HECM borrowers in their homes whenever possible, while protecting FHA’s Mutual Mortgage Insurance Fund if a default cannot be cured.