April 29, 2015
The FHA and HUD have announced more changes to the FHA Home Equity Conversion Mortgage (HECM) loan program. A recent FHA Mortgagee Letter, “Home Equity Conversion Mortgage (HECM) Due and Payable Policies”, and affects all FHA HECM loans that become due and payable on or after July 1, 2015.
The updates affect a variety of areas including:
–a requirement for mortgagees to provide HUD notice of a HECMs Due and Payable status;
–a requirement for mortgagees to provide HUD notice of the initiation of foreclosure;
–obtaining required appraisals;
–sales of properties securing defaulted or performing HECM loans;
–extensions available when marketing a HECM for sale and/or participating in Hardest Hit Funds programs;
–curtailment of debenture interest for missed deadlines
This mortgagee letter announces FHA’s position on when HECM loans (with case numbers issued before August 4, 2014) are considered due and payable without the approval of HUD. The mortgagee letter announces this is true when:
–a mortgagor died and the property is no longer the principal residence of at least one surviving mortgagor;
–a mortgagor conveyed all of their title in the mortgaged property and no other mortgagor retains title to the property.
The mortgagee letter also states, “A HECM with a Case Number issued before August 4, 2014, is considered due and payable with HUDs approval, if one of the following conditions applies:
–no surviving mortgagor maintains the property as their principal residence;
–a mortgagor fails to occupy the property for a period of more than twelve consecutive months because of physical or mental illness, and the property is not the principal residence of at least one other mortgagor;
–an obligation of the mortgagor under the HECM is not fulfilled.
Notwithstanding the above, for a HECM with a Case Number issued before August 4, 2014, where the last surviving mortgagor is survived by a Surviving Non-Borrowing Spouse, mortgagees must follow the requirements of ML 2015-03 to determine eligibility for Due and Payable status.”
There are many parts of the HECM update–we will cover some of the most relevant ones in future blog posts. For more information on how these updates may affect your current or future HECM loan, ask your loan officer how recent changes to the FHA HECM program may affect your transaction.
Do you have questions about FHA refinance loans? Ask us in the comments section.