Feds announce changes to reverse mortgage program

WASHINGTON, D.C. — The Federal Housing Administration released new proposed policy updates to its Home Equity Conversion Program, according to a statement issued Wednesday by the Department of Housing and Urban Development.

“At HUD, we’re constantly working to enhance, update, and streamline our key programs to make them accessible and easy to navigate for those we serve,” HUD Secretary Marcia L. Fudge wrote in the statement. “We urge the public to provide us feedback on our new proposed changes to Home Equity Conversion Mortgages, so we can best benefit seniors, their families, and lenders.”

Home equity conversion mortgages, also called reverse mortgages, can be a boon for seniors who own their homes but whose income has dropped. With a HECM, the lender makes payments to the borrower based on the equity in the home. The loan does not need to be repaid until the borrower no longer lives in the home or fails to meet the obligations of the loan. When the loan becomes due, it can be repaid by selling the home or using other assets. If the home is sold, the proceeds are used to repay the loan, and any remaining equity goes to the borrower or their heirs.

The proposed changes would streamline certain requirements and reduce operational challenges associated with servicing an HECM portfolio, according to the statement. Key changes include:

• 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 who are behind on their HECM financial obligations;

• Expanding the ability of mortgage servicers to work with borrowers who are behind on their property tax 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;

• 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 to mortgage servicers for completing these alternatives.

“The HECM program remains one of the cornerstone programs on the market to help seniors who want to stay in their own homes as they age,” Federal Housing Commissioner Julia R. Gordon wrote in the statement. “These proposals benefit seniors with HECM mortgages as well as their families, and they also facilitate participation in the program by HECM lenders.”