April 5, 2016
The FHA and HUD have issued new, more permissive HECM guidelines for lenders, with an optional extension to submitting a Due and Payable request where borrowers are behind on the payment of their property taxes and/or hazard insurance premium” according to Mortgagee Letter HUDNo.16-07.
That Mortgagee Letter states, “For HECM loans that were in foreclosure proceedings prior to the issuance of Mortgagee Letter 2015-11, mortgagees may assess those borrowers for a Repayment Plan in accordance with Mortgagee Letter 2015 – 11. For HECM loans that exceed 98% of the Maximum Claim Amount (MCA) or would exceed 98% of the MCA if they were provided a Repayment Plan, mortgagees may elect to assess and provide such borrowers a Repayment Plan in accordance with Mortgagee Letter 2015-11.”
HECM borrowers are required to stay current on all property tax obligations associated with the property securing the HECM loan. Under the new guidance, lenders have additional flexibility on when falling behind on such payments makes the HECM loan due in full.
“Mortgagees may delay submitting a Due and Payable request to HUD for loans with a total arrearage amount associated with property taxes and hazard insurance that is less than $2,000, by uploading documentation…that established that either :
1. The mortgagee is unable to contact the borrower, the borrower is current on his or her Certification of Occupancy, and the mortgagee has no indication that the borrower has vacated the property;
or
2. The mortgagee has contacted the borrower, the borrower has expressed a willingness to repay, and the borrower is currently attempting to make payments.”
However, the new guidelines also have specific standards for when an FHA HECM loan could be declared due and payable in full:
“Mortgagees must submit a Due and Payable request to HUD immediately upon the occurrence of any of the following events, whichever occurs first:
1. The borrower fails to timely complete the annual Certification of Occupancy ;
2. The borrower no longer occupies the property, securing the HECM, as his or her principal residence;
3. Twelve (12) months from the first missed property tax and/or hazard insurance payment has elapsed, and the mortgagee is still unable to contact the borrower;
4. The borrower has expressed an unwillingness to repay; or
5. The total arrearage amount exceeds $2,000.”
There are additional policy changes which we will examine in future blog posts. In the meantime, you can learn more about the new changes at the FHA/HUD official site.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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