Affirming its commitment to the senior citizen population, on May 17, 2023, the Federal Housing Administration (FHA) issued Mortgagee Letter 2023-10, implementing amendments to the Home Equity Conversion Mortgage (HECM) assignment claim submission criteria.
As a bit of background, a HECM is a reverse mortgage insured by the FHA. HECMs, as any reverse mortgage, are equity extraction products that allow elderly borrowers (generally 62 years old and older) to convert equity they have built up in their homes over time into cash. Only an FHA-approved lender may offer a HECM, and of noted importance, a maximum claim amount (MCA) is the highest amount the FHA will insure on the reverse mortgage. Once the principal balance of the reverse mortgage reaches a certain threshold of the MCA, a servicer may submit a claim, a HECM Assignment Claim Type 22, to assign the loan to the FHA in exchange for a payment of the loan balance. Due to recent market liquidity concerns, Mortgagee Letter 2023-10 reduces the MCA threshold from 97.5% to 97% to allow reverse mortgage servicers “greater flexibility” in managing their HECM portfolios.
A HECM Assignment Claim Type 22 also requires submission of the original note and mortgage. However, in an attempt to avoid delay, Mortgagee Letter 2023-10 allows reverse mortgage servicers to submit copies of the note and mortgage with the assignment claim application but requires submission of the original note and mortgage within 90 days of the FHA’s claim payment. Further, for HECMs with FHA case numbers assigned before September 19, 2017, Mortgagee Letter 2023-10 extends the timeline for delivering recorded assignments of the HECM mortgage from six months to 12 months. Lastly, Mortgagee Letter 2023-10 modifies the supporting documentation necessary to submit an assignment claim for Preliminary Title Approval. For instance, a complete package must include the borrower’s payment method, copy of the notice of assignment sent to the borrower, and payment history, amongst a variety of other requirements.
Overall, the procedural amendments reflected in Mortgagee Letter 2023-10 are designed to expedite the HECM Assignment Claim Type 22 payout. According to the FHA, and in consideration of recent market conditions, Mortgagee Letter 2023-10 “eliminates delays for servicers in filing assignment claims.” We encourage our reverse mortgage clients and all reverse mortgage servicers to review Mortgage Letter 2023-10 and revise their procedures and policies accordingly.