The Federal Housing Administration (FHA) has announced new flexibilities [1] to help senior homeowners with FHA-insured Home Equity Conversion Mortgages (HECMs) who are behind on required property charge payments due to effects of COVID-19.
Mortgagee Letter 2022-23 [1], the new COVID-19 HECM Property Charge Repayment Plan, will allow mortgage servicers to offer eligible homeowners up to five years to repay property charges, such as taxes and homeowners insurance, that the servicer advances on the homeowner’s behalf when the homeowner is unable to make these payments.
“For senior homeowners, recovering from the financial effects of the pandemic may be especially challenging,” said Federal Housing Commissioner Julia Gordon [2]. “The new repayment plan option announced today will give more seniors behind on their property charges the opportunity to fulfill the obligations of their HECM and remain in their homes.”
With the new COVID-19 HECM Property Charge Repayment Plan:
- Borrowers may receive a repayment plan regardless of the dollar amount of property charge payments owed.
- Borrowers can benefit from the use of jurisdictional Homeowner Assistance Funds [3].
- Servicers can offer homeowners a repayment plan of up to five full years (60 months) regardless of any prior repayment plan usage.
- Servicers can offer the COVID-19 HECM Property Charge Repayment Plan for up to one year after the end of the COVID-19 National Emergency.
- To be eligible, borrowers must attest that they have been impacted by the COVID-19 pandemic, which can be a verbal statement to the servicer.
Homeowners are required to pay property charges as a condition of their HECM. If they are unable to maintain these payments, they are considered in default and their mortgage servicer must advance funds to pay the property charges. Failure to resolve a property charge default can result in foreclosure. To remedy the default, servicers may offer homeowners a repayment plan to repay the advances made by the servicer. FHA’s standard HECM property charge repayment policy only permits 60 months in total to repay property charge advances.
The COVID-19 HECM Property Charge Repayment Plan is calculated using the requirements for a standard HECM repayment plan found in Mortgagee Letter 15-11 [4], as amended by Mortgagee Letter 16-07 [5]. The Borrower is eligible for a COVID-19 HECM Property Charge Repayment Plan even if they have been unsuccessful on a prior repayment plan, the total outstanding arrearage is greater than $5,000, or both. All other requirements with respect to HECM Property Charge Repayment Plans apply to a COVID-19 HECM Property Charge Repayment Plan.
If the borrower is unsuccessful in completing a COVID-19 HECM Property Charge Repayment Plan, the Mortgagee may evaluate the borrower for standard HECM loss mitigation options.