Feds Seek to Enhance HECMs for Senior Homeowners

The Federal Housing Administration (FHA) has is seeking industry feedback on a set of proposed policy updates to its Home Equity Conversion Mortgage (HECM) program designed to improve program stability and to respond to changing market conditions. These measures reaffirm FHA’s commitment to the future success of this important program and the senior citizen population it is designed to serve. FHA is seeking feedback on the policy updates contained in its draft Mortgagee Letter through November 7, 2023.

“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,” said HUD Secretary Marcia L. Fudge. “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.”

The proposed updates would streamline certain requirements and reduce operational challenges associated with servicing a HECM portfolio. 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.
• 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,” said Federal Housing Commissioner Julia R. Gordon. “These proposals benefit seniors with HECM mortgages, as well as their families, and they also facilitate participation in the program by HECM lenders.”

Earlier this week, the FHA published its consolidated and comprehensive policies for the HECM program, and the inclusion of these policies in the Single-Family Housing Policy Handbook 4000.1. For the first time ever, all HECM program requirements will be available in a single place.