With the publication of Mortgagee Letter 2023-23, U.S. Department of Housing and Urban Development (HUD) provided valuable benefits to HECM borrowers and their heirs by streamlining HECM servicing requirements and mitigating risk to the Mutual Mortgage Insurance Fund (MMIF).
A few of the benefits include:
- an expanded option for HECM borrowers to satisfy their annual occupancy requirement;
- an increase in the property charge arrearage amount for Optional Delay; and
- expanding the Cash for Keys offering payable in conjunction with short-sale and deed-in-lieu-of-foreclosure loss mitigation options and prior to eviction after a foreclosure.
These benefits are optional—and not required by HUD—so borrowers and their heirs must check with their servicer to confirm availability and requirements to qualify.
Occupancy
HECM borrowers now have a variety of options available to meet their obligation to certify their occupancy annually. Servicers have responded quickly to implement options that make the process easier for borrowers, such as providing methods to certify verbally and electronically, as well as offering the ability to complete the certification on a secure borrower website. These are in addition to the paper form mailed around the loan’s closing date each year, which can be completed and returned to the servicer via email, fax or the U.S. Postal Service.
Optional Delay
HUD has increased the total property charge arrearage amount from $2,000 to $5,000, allowing mortgagees the option under the higher threshold to delay asking HUD to call the loan due and payable. In addition, this also provides borrowers with the ability to enter into a repayment plan on low-balance arrearages to avoid the requirement to submit the loan to HUD for due and payable approval. To qualify for an Optional Delay, borrowers must express a willingness to repay the taxes and insurance (T&I) default amount and/or be currently making payments. And they also must be current on their annual occupancy certification.
Cash for Keys
HUD has provided an expanded opportunity for mortgagees to pay a generous monetary consideration to qualifying applicants as an incentive to expedite a short sale or deed-in-lieu and as an alternative to legal eviction. The Cash for Keys incentive may be available to the borrower or other party with a legal right to sell the property or execute a deed-in-lieu-of-foreclosure, or to occupants to vacate the property prior to a legal eviction. Cash for Keys will be offered by the servicer when circumstances permit, and it will be important for the borrower or third party to respond in a timely manner to any offer received. The amount of the Cash for Keys monetary incentive for a short sale or deed-in-lieu can vary from $5,000 to $7,500, depending upon how long after the Due and Payable Date the option is completed. In some cases, it may also include an additional reimbursement for probate costs of up to $5,000 (by providing receipts). Documentation will be required, such as evidence of the sale closing date, date and amount of the offer, the date the occupant received the funds and date of vacancy. For a deed-in-lieu or post-foreclosure eviction avoidance, an inspection to confirm the property is in a broom-swept condition and all built-in appliances and fixtures remain on the property is required. Additional documentation may be required by the servicer, as applicable. Interested parties should contact the loan servicer as soon as possible for additional details.
These benefits not only help borrowers and their heirs to navigate HECM servicing requirements more easily, but they also are beneficial to the MMI fund, as well. The Cash for Keys offering can expedite the resolution of the loan and reduce a variety of costs associated with a foreclosure action when a better option may be a short sale or deed-in-lieu-of-foreclosure.
(Editor’s note: This column was submitted courtesy of Celink.)
