HUD Issues HECM Guidance re: Delinquent Property Taxes and Hazard Ins Premiums

HUD recently issued guidance for reverse mortgage homeowners and their lenders on how to handle outstanding property taxes and unpaid hazard insurance premiums. The guidance is intended to assist elderly borrowers who have neglected to pay these expenses and may face foreclosure.


A copy of the mortgagee letter (2011-01) is available at:

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-01ml.pdf

Specifically, the mortgagee letter provides loss mitigation guidance for the resolution of Home Equity Conversion Mortgages (HECM) that are delinquent due to unpaid property charges, and mortgages wherein due and payable requests were previously deferred by HUD. The guidance applies to all HECMs where the mortgagor is delinquent in paying property charges, or the mortgagee has advanced corporate funds to satisfy an unpaid property charge on behalf of the mortgagor, or both.

The guidance includes sample letters that lenders may use to make certain borrowers understand that property tax and hazard insurance are required expenses that must be paid even though the homeowner owes nothing on their mortgage loans. HUD reportedly is planning to publish a proposal to add more preventative measures and consumer protections to the existing reverse mortgage regulations.