The ""Federal Housing Administration"":http://www.fha.gov (FHA) aims to assist senior borrowers with its newly released guidance on reverse mortgages, or the Home Equity Conversion Mortgage (HECM) program.
[IMAGE] According to the federal agency, some elderly homeowners are struggling with outstanding property taxes and unpaid hazard insurance premiums. Those who neglect to pay these expenses may face foreclosure.
""We understand that some senior citizens have not paid their taxes or insurance for some time and may be at risk of losing their home,"" said FHA Commissioner David H. Stevens. ""Today's guidance is designed to establish a clear framework that protects both the homeowner and the lender who participate in our reverse mortgage program.
While HUD regulations allow lenders to make tax and insurance payments on behalf of their elderly clients from the borrower's available mortgage funds, once those resources are exhausted, the lender must advance funds to[COLUMN_BREAK]
protect FHA's interest and obtain reimbursement from the borrower. Over time, these unpaid debts and lender advances could put the FHA insurance fund at risk and result in foreclosure proceedings against delinquent seniors.
FHA's ""Mortgagee Letter"":http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-01ml.pdf released January 3rd applies to all HECM loans where the lender/servicer advanced corporate funds to satisfy an unpaid property charge on behalf of the borrower.
It reminds lenders that foreclosure is a last resort when dealing with elderly clients, and it includes sample letters lenders may use to ensure borrowers understand that property tax and hazard insurance are required expenses even if the homeowner's mortgage is paid in full.
Lenders must send letters to borrowers who recently missed a property charge payment, borrowers who had an unpaid property charge balance for an extended period, and borrowers with a significant unpaid property charge balance. Lenders have until February 28th to send all letters to borrowers with loans that are delinquent as of the date of the Mortgagee Letter. Thereafter, letters must be sent as soon as the mortgagee receives notice of a missed payment.
According to FHA, the lender must also offer loss mitigation options to the borrower.
HUD is providing nearly $3 million to housing counseling agencies to help reverse mortgage borrowers. Counselors will help elderly homeowners create repayment plans, or if keeping the home is no longer an option, counselors will assist with the transition to alternative housing.