Financial Relief for Reverse Mortgage Borrowers Impacted by Covid-19

With millions of Americans dealing with health issues, job loss and other hardships during the coronavirus pandemic, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) are instructing services of Home Equity Conversion Mortgages (HECMs) to delay due and payable requests on reverse mortgage loans for six months for borrowers who request such relief.

This action, outlined in Mortgagee Letter 2020-06 by HUD, will help ease the immediate pressures faced by many Americans who, through no fault of their own, are struggling with financial uncertainty.

“Upon request of the Borrower, the Mortgagee (the lender) must delay submitting a request to call a loan due and payable,” according to the provisions of the letter now in effect. “The initial extension period may be up to 6 months. If needed, an additional period of up to six months may be approved by HUD. The term of either the initial or the extended extension period may be shortened at the Borrower’s request. The Mortgagee must waive all late charges, fees, and penalties, if any, as long as the Borrower is in an extension period.”

“The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy,” said HUD Secretary Dr. Ben Carson in a press release announcing these initiatives. “If you’re struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation.”

Meanwhile, servicers of reverse mortgages are still working out the details and applications of the new provisions and how they will impact borrowers, as well as their own operations.

“We are very pleased to see HUD provide additional relief to HECM borrowers and servicers with this latest Mortgagee Letter,” said Ryan LaRose, president and COO of Celink, a major reverse mortgage servicer. “We have been working with NRMLA since the letter was published to fully determine the impact to the various HUD default timeline requirements. Additionally, we are still in the process of internally digesting the information and determining what impact it will have on our operations.”

Only borrowers experiencing difficulty in meeting the terms of their reverse mortgage as a result of the coronavirus crisis should contact their servicer. Those able to meet their obligations should continue to do so. This way, servicers can devote their resources to those “truly in need,” the FHA explained.

Potential relief for reverse mortgage borrowers affected by the COVID-19 Presidentially-Declared National Emergency follows provisions outlined in the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law by President Donald Trump on March 27.