HUD Updates HECM Servicing Policies

FHA recently published Mortgagee Letter (ML) 2023-23, updating Home Equity Conversion Mortgage (HECM) servicing policies. The updates include, but are not limited to:

• Allowing mortgage servicers to contact borrowers by phone to verify occupancy for the program’s required annual occupancy certification;

• Allowing outstanding homeowner’s association dues to be included in the calculation of a repayment plan for borrowers;

• Expanding the ability of mortgage servicers to work with borrowers who are behind on their property taxes or hazard insurance by an amount up to $5,000 without calling the mortgage due and payable;

• Allowing mortgage servicers to assign a HECM to HUD after the servicer has funded a cure for a borrower’s delinquent financial obligations, so long as the borrower has made all property charge payments for one year and all other assignment eligibility criteria are met;

• Aligning post-Due and Payable appraisal requirements for all HECMs;

• Modifying the maximum arrearage amount for mortgagees when electing to delay requesting approval to call a HECM Due and Payable;

• Expanding and updating the criteria for payment of Cash for Keys;

• Streamlining requirements for executing alternatives to foreclosure and updating existing incentive payments for successful completion of loss mitigation options; and

• Providing a new incentive payment plan for HECM servicers that meet certain alternatives to foreclosure.

The provisions of this ML are effective based on various dates set forth in the ML.