Servicing Corner DID YOU KNOW that 70 percent of borrowers whose loans are called due for not certifying their occupancy end up having that due and payable status rescinded in 60 days or less—but not without incurring unnecessary costs? One of the most frequent inquiries HECM borrowers make is about their annual occupancy certification requirement. Surprisingly, many borrowers do not understand this annual obligation and are surprised when they receive a request from their servicer to certify their occupancy. Originators can help alleviate their confusion by having a discussion with borrowers during the origination process and again right after closing to remind borrowers of this important obligation. The definition of a borrower’s principal residence may be found in 24 Code of Federal Regulations § 206.3 Definitions. The § 206.27 Mortgage provisions require that the mortgage is due and payable if: • The property ceases to be the principal residence of a mortgagor borrower for reasons other than death and the property is not the principal residence of at least one other borrower; or • For a period of longer than 12 consecutive months, a mortgagor borrower fails to occupy the property because of physical or mental illness and the property is not the principal residence of at least one other borrower. If borrowers fail to certify their occupancy, in writing and in a timely manner each year, they risk their loan being called due and payable and being referred to an attorney to begin foreclosure proceedings. If this occurs, default fees, such as property inspection, preservation and attorney costs, will be incurred and charged to the loan. If borrowers are truly complying with their occupancy requirement but not attesting to their occupancy of the subject property in writing, this can be a costly mistake. Servicers make every effort to prevent this type of default, including by doing the following: • The first certification request is mailed within 30 days of the loan’s closing anniversary. An email may also be sent if the borrower’s email address is passed to the servicer at boarding; a notification is posted to their online account, if applicable; and a reminder message may appear on their monthly account statement. • If the borrower doesn’t reply, a second letter will be mailed 30 days later. • After another 30 days, a phone campaign begins to reach the borrower. This includes contacting authorized third parties on the account and alternative contacts listed on the loan application. • Property inspections and door knocks are ordered as applicable. If all efforts prove unsuccessful, servicers have no other choice than to submit the loan to the U.S. Department of Housing and Urban Development for approval to call the loan due and payable. How Can You Help? Educate your borrowers. Explain their obligations, and set their expectations in advance so they can avoid this pitfall. Encourage them to open their mail when they receive it, don’t let it pile up and don’t discard letters, especially coming from their loan servicer, without opening them. You may even suggest they set a calendar reminder on the anniversary date of their closing every year to trigger their memory that their annual occupancy certification is due. This column was submitted by Celink. What Is All the Fuss About Occupancy? You Can Help Borrowers Understand Occupancy Rules 6 REVERSE MORTGAGE / NOVEMBER–DECEMBER 2023
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