The U.S. Department of Housing and Urban Development published two mortgagee letters this week that impact the Home Equity Conversion Mortgage (HECM) program.
Mortgagee Letter 2019-15 modifies the requirements for assigning loans under the Mortgagee Optional Election (MOE) process, while Mortgagee Letter 2019-16 extends the HECM Collateral Risk Assessment requirements indefinitely. Both mortgagee letters took immediate effect.
Collateral Risk Assessment was due to expire on September 30, 2019. ML 2019-16 rescinds that termination date and extends CRA for the foreseeable future.
FHA stated in ML 2019-16 that it evaluated the HECM program requirements implemented under ML 2018-06 and determined that the collateral risk assessment requirement is “having the desired effect of mitigating significant collateral valuation risks posed to the Mutual Mortgage Insurance Fund (MMIF) and borrowers.”
MOE Assignment Changes
This ML — in addition to providing updated guidance — eliminates all interim deadlines for MOE Assignments that were outlined in ML 2015-15 for HECM case numbers issued prior to August 4, 2014.
Since implementation of the MOE Assignment process outlined in ML 2015-15, FHA has found that several of its requirements obstructed mortgagees’ election of the assignment option. To address these issues, and to improve the fiscal safety and soundness of the HECM program, FHA has modified the requirements for HECM MOE Assignment claims by:
- Eliminating the interim MOE Assignment election and assessment deadlines, along with associated notification requirements;
- Eliminating the 120-day timeframe for bringing current all property charges on a HECM loan that is subject to a pre-existing loss mitigation repayment plan;
- Establishing a 180-day reasonable diligence timeframe to initiate a MOE Assignment;
- Eliminating the requirement for an eligible surviving non-borrowing spouse to obtain good and marketable title to the property that secured the HECM or demonstrate the legal right to reside in the property for life, and modification of related certifications and assignment criteria;
- Updating the definition of eligible non-borrowing spouse; and
- Requiring mortgagees to request information from borrowers to attempt to identify non-borrowing spouses.
This set of changes is designed to facilitate a more streamlined HECM MOE process for mortgagees, which in turn will allow them to more effectively assist eligible HECM non-borrowing spouses avoid foreclosure.
Non-Borrowing Spouse Marketing Materials
FHA has developed new informational materials and new web pages to help mortgagees, housing counselors and consumers better understand the components and considerations involved with a HECM where there is a non-borrowing spouse. These materials are posted on the new Home Equity Conversion Mortgage (HECM) Information Regarding Surviving Non-Borrowing Spouses webpage on hud.gov.