Proposal posted for feedback will ensure long-term program viability and expanded availability for senior homeowners.
The Federal Housing Administration (FHA) today announced it has posted for industry feedback a proposed update to its Home Equity Conversion Mortgage (HECM) assignment claims eligibility policy. The proposal enables certain categories of due and payable HECMs that were previously ineligible for assignment to be assigned to HUD, enabling servicers to obtain earlier resolution of these loans through HUD’s assignment claims process. This change will support servicer liquidity and strengthen the HECM market for senior homeowners who use a HECM to age in place.
“At HUD, Home Equity Conversion Mortgages (HECM) are one of our most impactful tools to support seniors,” said HUD Secretary Marcia L. Fudge. “I am pleased that our FHA team is expanding the availability of this program so everyone can age in place with dignity.”
Under current program requirements, mortgage servicers can assign a HECM to HUD when the mortgage reaches 98 percent of the Maximum Claim Amount and there is an eligible borrower or non-borrowing spouse residing in the property. Once the mortgage is assigned to HUD and placed in HUD’s Secretary-held portfolio, FHA disburses claim funds to the mortgage servicer and assumes responsibility for servicing the mortgage. The assignment option reduces costly servicing expenses and allows mortgage servicers to obtain proceeds faster than otherwise possible through other measures.
“Today’s proposal is the latest in the series of measures we’ve taken throughout this year to facilitate greater liquidity and stability in the HECM market,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Preserving HECM as an option for seniors who have financial needs but want to age in place is a high priority for FHA.”
HECMs deemed due and payable have been ineligible for assignment to HUD. The proposal posted today would permit servicers to assign a HECM to HUD when the mortgage becomes due and payable due to the death of all borrowers and all eligible or ineligible non-borrowing spouses. As a result, servicers no longer will have responsibility for servicing these loans and can receive claim payments upon assignment of these mortgages.
FHA is seeking industry feedback on its proposal through December 11, 2023.