All Home Equity Conversion Mortgage applications which received case numbers after Dec. 1, 2010 must have contain the revised closing certification, which includes language that pertains to home sellers and purchasers involved in a HECM for Purchase transaction.
According to Department of Housing and Urban Development Mortgagee Letter 2010-39, the new statement requires the mortgagor to certify that any cash used for closing costs or other "monetary investment" did not come from the seller or any other person or entity that benefits from this transaction.
The seller must certify that the HECM borrower was not paid or reimbursed of those costs before, during or after loan closing.
Separately, the Federal Housing Administration has issued a mortgagee letter that creates guidance for HECM servicers in situations where the borrower has outstanding property tax and insurance debts.
In a statement, FHA said while this guidance is intended to help HECM borrowers avoid foreclosure, lender may have no other choice unless the T&I defaults are not cured.
Under current policy, servicers may make T&I payments from the borrower's available mortgage funds. But when those funds are exhausted, servicers must make the payments and seek reimbursement from the borrower.
The mortgagee letter, 11-001, includes sample letters for lenders to use to remind borrower that T&I are required expenses that must be paid even though the borrower owes nothing on his or her mortgage loan.
HUD will provide nearly $3 million to housing counseling agencies to specifically help reverse mortgage borrowers who are facing this problem. Counselors will help the elderly homeowner work with the servicer to create a repayment plan that cures the outstanding balance due the servicer. If keeping the home is no longer an option, HUD said, the counselors would help the borrowers transition to alternative housing.
