«ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER April 23, 2015 Mortgagee Letter 2015-11 To All FHA Reverse Mortgage Loan Servicers ...»
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER
April 23, 2015 Mortgagee Letter 2015-11
To All FHA Reverse Mortgage Loan Servicers
Subject Loss Mitigation Guidance for Home Equity Conversion Mortgages
(HECMs) in Default due to Unpaid Property Charges The purpose of this Mortgagee Letter is to communicate permissible loss Purpose mitigation options mortgagees may provide when property charges are not paid in accordance with the terms of a HECM.
Affected This Mortgagee Letter supersedes and rescinds Mortgagee Letter 2011-01 in Policy its entirety.
Effective Date This Mortgagee Letter is effective immediately for all property charge defaults occurring on or after the publication date. For defaults occurring before the date of this Mortgagee Letter, mortgagees have 180 days from the date of publication to review their portfolio to bring HECM loans into compliance with the requirements herein.
For HECM loans currently subject to a repayment plan, such plans may continue so long as they remain current. In the event that they cease to remain current, mortgagees must comply with the requirements of this Mortgagee Letter.
Loss Mitigation The loss mitigation options set out in this Mortgagee Letter are not available not Available during a Deferral Period. In addition, HECM loans that are in default, and during a eligible to be called due and payable for reasons other than the death of the Deferral Period last surviving mortgagor, are not eligible for an assignment.
Nothing in this Mortgagee Letter confers any right to a Mortgagor or a NonBorrowing Spouse to any action on the part of HUD or the mortgagee.
Mortgagees are permitted to make property charge payments on behalf of HECM Loans in mortgagors, who are borrowers on the HECM note, from the mortgagor’s Default due to Unpaid Property funds, available under the HECM. If the mortgagor has insufficient funds Charges available under the HECM to satisfy these unpaid property charges, the mortgagor is in default, the mortgage is eligible to be called due and payable, and the mortgagee must submit a due and payable request.
During a Deferral Period, a mortgagee may not make property charge
Previous Due Due and Payable Requests that were approved prior to the publication of and Payable this Mortgagee Letter will not be rescinded. In addition, HECMs currently Requests subject to foreclosure actions are not eligible for the permissive loss mitigation guidance herein.
The specific mortgagee requirements for a Due and Payable Notice are outlined in HUD regulations and previously published guidance.
At any time prior to a foreclosure, a HECM loan will no longer be Curing the Default Post a considered to be in default if a Mortgagor or an Eligible Non-Borrowing Due and Payable Spouse becomes current on all property charges, including having repaid all Request corporate advances made by the mortgagee (if any) and has fully cured any outstanding reasons for default. If the loan was called due and payable, and foreclosure proceedings were initiated, HUD’s regulations regarding reinstatement found at 24 CFR § 206.125 apply. Where the last surviving mortgagor has died and there is an Eligible Non-Borrowing Spouse, the Deferral Period Reinstatement provisions of Mortgagee letter 2015-02 and 2015-03 will apply.
The HERMIT modifications required to capture the Repayment Plan data are targeted for release in June, 2015.
Any outstanding Home Owners Association (HOA) fees are not eligible to be included in a Repayment Plan.
(2) Evaluate the mortgagor’s ability, using the financial information provided by the mortgagor as set forth in section B below, to repay the mortgagee’s corporate advances through a Repayment Plan of a time period determined by the mortgagee except that in no event may a Repayment Plan exceed five years or such shorter time period as necessary to ensure repayment before the mortgage reaches 98 percent of the Maximum Claim Amount (MCA).
B. Repayment Plan Calculation
Mortgagees must calculate the terms of a Repayment Plan by:
Dividing the “Total Arrearage” in equal monthly installments, not to exceed 60 months or in such shorter time period as necessary to ensure repayment before the mortgage reaches 98 percent of the Maximum Claim Amount (MCA) and which do not exceed 25 percent of the mortgagor’s monthly surplus income amount.
If only monthly installments exceeding 25 percent of the mortgagor’s monthly surplus amount can be identified after performing the aforementioned calculation, mortgagees may extend the Repayment Plan to maximum remaining time available to achieve the lowest possible payment.
Calculating “Monthly Surplus Income”
For the purposes of this Mortgagee Letter, the mortgagor’s “Monthly Surplus Income” is determined by subtracting the mortgagor’s necessary living expenses – including healthcare, revolving and installment debt, any payment obligations, utility bills, and other household-related expenses and a monthly amount needed for property charges due over the next twelve months from available sources of income as stated by the mortgagor.
Calculating “Total Arrearage”
For the purposes of this Mortgagee Letter, the “Total Arrearage” is determined by adding the outstanding corporate advances made for the account to any property charges, less any for HOA fees, due for the next 90 days. Anytime a property charge payment is missed, with the exception of a HOA fee, the “Total Arrearage” should be recalculated.
Please see Appendix A for sample calculations.
C. Options available where Additional Unpaid Property Charges are incurred or a Hardship is experienced after a Repayment Plan has been established.
Additional Unpaid Property Charges If the HECM mortgagor is currently subject to a Repayment Plan and again fails to pay required property charges, the mortgagee, may reevaluate the mortgagor for an additional corporate advance. Mortgagees must solicit new financial information from the mortgagor to conduct this new Repayment Plan assessment.
The revised Repayment Plan must recalculate the “Total Arrearage”, which should include all outstanding corporate advances made. If the mortgagee determines that a new Repayment Plan is not reasonable after performing this calculation, this loss mitigation option is not available. No mortgagor may be given more than 60 months (or such shorter amount of time as necessary to ensure repayment before the mortgage reaches 98 percent of the MCA) total to repay any and all advances.
If the mortgagor experiences a decrease in their available amount of surplus income due to a verified hardship (e.g., illness, death of a household member who was identified as a contributor of income in a previous Repayment Plan calculation, emergency home repair, loss of employment income, etc.) and seeks to have a Repayment Plan adjustment, mortgagees must solicit new financial information from the mortgagor to conduct a new Repayment Plan assessment.
If the mortgagee determines that the recalculated Repayment Plan is reasonable, the mortgagor may be provided with a new monthly payment amount and term. The mortgagee may make further adjustments to the recalculated Repayment Plan in accordance with this section. However, no mortgagor may be given more than 60 months (or such shorter amount of time as necessary to ensure repayment before the mortgage reaches 98 percent of the MCA) total to repay any and all advances.
D. Unsuccessful Repayment Plan Performance A mortgagor’s Repayment Plan performance is unsuccessful when a full monthly payment is not made within 60 days of the monthly payment due date.
For a mortgagor failing to perform successfully under an existing
If a Repayment Plan is insufficient or unsuccessful, any extension to the
“At Risk” aforementioned foreclosure timeframes cease immediately and the mortgagee must proceed in accordance with HUD’s regulations. However, HECM Mortgagors and mortgagees may request an additional extension to the foreclosure
Allowable timeframes, if the following criteria are met:
Foreclosure Extensions Youngest living mortgagor is at least 80 years of age; and The mortgagee, after employing acceptable and prudent servicing practices, has determined that the mortgagor has critical circumstances such as a supported terminal illness, substantiated long-term physical disability, or a “unique” occupancy need (e.g., terminal illness of family member receiving care at the residence).
Repayment Any approved Property Charge Loss Mitigation Extension immediately Plans Satisfied ceases when the last-surviving mortgagor dies. Any outstanding corporate Immediately advances owed become immediately due. If any amount owed is not Upon Death satisfied within thirty (30) days, the mortgagee must proceed in accordance with applicable regulations.
The information collection requirements contained in this document have Information Collection been approved by the Office of Management and Budget (OMB) under the Requirements Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2502-0429. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.
Attachment Appendix A – Calculating a Repayment Plan APPENDIX A – Calculating a Repayment Plan Initial Calculation The following chart depicts an example of how mortgagees may perform and apply the Repayment Plan calculation for determining the mortgagor’s potential Repayment Plan
A mortgagor with a “Total Arrearage” equal to $5,000 and that is determined to have a surplus income of $1,250 per month, must be placed into a 24 month Repayment Plan agreement with monthly payments totaling $208. Note that the monthly repayment amounts for the 36, 48, and 60 month Repayment Plan intervals are also below 25% of the mortgagor’s monthly surplus income, yet the 24 month agreement is correct as it is the shortest Repayment Plan time frame that the monthly repayment amount was less than 25% of the monthly surplus income.
If the mortgagor had a “Total Arrearage” of $5,000 and is determined to have a surplus income of $250 per month, the mortgagee must extend the Repayment Plan agreement out to five years with equal monthly payments totaling $83 since there is no repayment option less than 25% of the monthly surplus income.
Recalculation Due to Reduction in Surplus Income or Missed Property Charge Payment
A Mortgagor has the following Repayment Plan identifiers:
If the mortgagor experiences a financial hardship…
The mortgagee may recalculate the Repayment Plan using the following steps:
1. Determine the new Surplus Income of the Mortgagor