On December 15, 2022, the Federal Housing Administration (FHA) issued Mortgagee Letter 2022-23, establishing the COVID-19 Home Equity Conversion Mortgage (HECM) Property Charge Repayment Plan.
The COVID-19 HECM Property Charge Repayment Plan would aid HECM borrowers in covering costs associated with standard property charges. As a condition of their loan, HECM borrowers are required to pay property charges such as property taxes, insurance and Homeowner Association fees, etc. In the event HECM borrowers are unable to pay their property charges, mortgage servicers must advance funds to cover such charges.
Considering the financial impact of COVID-19, and in particular the impact of COVID-19 on HECM borrowers – generally, senior homeowners – the COVID-19 HECM Property Charge Repayment Plan would allow HECM borrowers to enter into a repayment plan to repay corporate advances for property charge defaults that took place even prior to the pandemic. According to the FHA, the “additional time to repay delinquent property charges will increase the likelihood that affected borrowers will be able to cure property charge delinquencies and avoid foreclosure.”
In order to qualify for the COVID-19 HECM Property Charge Repayment Plan, borrowers must have applied for Homeowner Assistance Funds (HAF) relief. The HAF relief received, if any, combined with the borrower’s ability to repay must cover the full amount of property charges advanced by the servicer. Borrowers must also indicate COVID-19 impact, and mortgage servicers must document the borrower’s attestation, including verbal attestations. Borrowers are allowed up to 60 months to repay their property charges under the COVID-19 HECM Property Charge Repayment Plan. FHA also notes that the 60-month maximum is not limited by any time a borrower is on a standard HECM repayment plan. In fact, borrowers currently on a standard HECM repayment plan may also qualify for the COVID-19 HECM Property Charge Repayment Plan. FHA goes further to state that a borrower may qualify 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.”
The provisions of the mortgagee letter are effective as December 15, 2022, and mortgage servicers may offer COVID-19 HECM Property Charge Repayment Plans no later than one year following the end of the COVID-19 National Emergency.