Home Equity Conversion Mortgage (HECM) Program: Mortgagee Optional Election Assignment for Home Equity Conversion Mortgages (HECMs) With FHA Case Numbers Assigned Prior to August 4, 2014-Response to Comments, 23808-23814 [2015-10019]
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23808
Federal Register / Vol. 80, No. 82 / Wednesday, April 29, 2015 / Notices
The purpose of this notice is to
allow an additional 30 days for public
comments. Comments are encouraged
and will be accepted until May 29,
2015. This process is conducted in
accordance with 5 CFR 1320.10.
ADDRESSES: Written comments and/or
suggestions regarding the item(s)
contained in this notice, especially
regarding the estimated public burden
and associated response time, must be
directed to the OMB USCIS Desk Officer
via email at
oira_submission@omb.eop.gov.
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received must include the agency name
and the OMB Control Number 1615–
0127.
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you need a copy of the information
collection instrument with instructions,
or additional information, please
contact us at: USCIS, Office of Policy
and Strategy, Regulatory Coordination
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Washington, DC 20529–2140,
Telephone number 202–272–8377.
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SUPPLEMENTARY INFORMATION:
Comments: Written comments and
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agencies should address one or more of
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(1) Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
(2) Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
(3) Enhance the quality, utility, and
clarity of the information to be
collected; and
(4) Minimize the burden of the
collection of information on those who
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DATES:
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are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submission of
responses.
Overview of This Information
Collection
(1) Type of Information Collection
Request: Reinstatement, With Change, of
a Previously Approved Collection For
Which Approval Has Expired; Existing
Collection In Use Without an OMB
Control Number.
(2) Title of the Form/Collection: EVerify Program Data Collections: 2015
Survey of E-Verify Employers.
(3) Agency form number, if any, and
the applicable component of the DHS
sponsoring the collection: No Agency
Form Number; USCIS.
(4) Affected public who will be asked
or required to respond, as well as a brief
abstract: Primary: Business or other forprofit. E-Verify Program Data
Collections: 2015 Survey of E-Verify
Employers is necessary in order for U.S.
Citizenship and Immigration Services
(USCIS) to obtain data from E-Verify
employers in anticipation of the
enactment of mandatory state and/or
national eligibility verification programs
for all or a substantial number of
employers.
(5) An estimate of the total number of
respondents and the amount of time
estimated for an average respondent to
respond: The estimated total number of
respondents for the information
collection E-Verify Program Data
Collections: 2015 Survey of E-Verify
Employers is 2,800 and the estimated
hour burden per response is 30 minutes
(.5 hours).
(6) An estimate of the total public
burden (in hours) associated with the
collection: The total estimated annual
hour burden associated with this
collection is 1,400 hours.
(7) An estimate of the total public
burden (in cost) associated with the
collection: The estimated total annual
cost burden associated with this
collection of information is $0.
Dated: April 22, 2015.
Laura Dawkins,
Chief, Regulatory Coordination Division,
Office of Policy and Strategy, U.S. Citizenship
and Immigration Services, Department of
Homeland Security.
[FR Doc. 2015–09953 Filed 4–28–15; 8:45 am]
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5735–N–05]
Home Equity Conversion Mortgage
(HECM) Program: Mortgagee Optional
Election Assignment for Home Equity
Conversion Mortgages (HECMs) With
FHA Case Numbers Assigned Prior to
August 4, 2014—Response to
Comments
Office of the Assistant
Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice; response to comments.
AGENCY:
On February 6, 2015, at 80 FR
6743, the Federal Housing
Administration (FHA) published a
notice to solicit public comment on the
alternative path to claim payment—the
Mortgagee Optional Election
Assignment—for certain HECMs
announced in Mortgagee Letter 2015–
03. The public comment period on the
February 6, 2015, notice closed on
March 9, 2015. FHA received 7 public
comments on the notice. In this notice,
FHA responds to questions and
comments raised by commenters.
FOR FURTHER INFORMATION CONTACT:
Ivery Himes, Director, Office of Single
Family Asset Management, Office of
Housing, Department of Housing and
Urban Development, 451 7th Street SW.,
Room 9172, Washington, DC 20410;
telephone number 202–708–1672 (this
is not a toll-free number). Persons with
hearing or speech impairments may
access this number by calling the
Federal Relay Service at 800–877–8339
(this is a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
FHA has a statutory obligation to
ensure the fiscal soundness of the FHA
insurance funds. FHA also has the
ability, pursuant to the Reverse
Mortgage Stabilization Act of 2013 (Pub.
L. 113–29), to establish, by notice or
mortgagee letter, any additional or
alternative requirements that the
Secretary, in the Secretary’s discretion,
determines are necessary to improve the
fiscal safety and soundness of the HECM
program, which requirements shall take
effect upon issuance.
Pursuant to this authority, FHA
established Mortgagee Letter 2015–03
on January 29, 2015, for immediate
effect. In Mortgagee Letter 2015–03,
FHA set out the Mortgagee Optional
Election (MOE) Assignment path to
claim payment for existing HECMs with
FHA Case Numbers issued prior to
August 4, 2014. FHA alerted mortgagees
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that aside from the present procedures
for either the sale of the home or
foreclosure of the HECM in accordance
with the mortgage insurance contract
terms as originally endorsed, or the
MOE Assignment alternative, no other
path to claim payment exists for HECMs
with FHA Case Numbers issued prior to
August 4, 2014.
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II. Discussion of the Public Comments
Received on the February 6, 2015,
Notice
On February 6, 2015, at 80 FR 6743,
FHA published a notice in the Federal
Register to solicit public comment on
the HECM program changes announced
in Mortgagee Letter 2015–03. FHA
received 7 public comments on the
notice. Comments were submitted by a
HECM servicer, a national reverse
mortgage association, legal aid and
advocacy organizations, and other
interested parties. In general, some
commenters applaud and support FHA’s
efforts to preserve the integrity of the
insurance funds in order to ensure the
continued viability of the HECM
program, while providing protections to
Non-Borrowing Spouses of deceased
HECM borrowers. However,
commenters seek clarification on many
policy and systems issues, and ask FHA
to consider alternative options. In this
notice, FHA takes the opportunity to
respond to the public comments and
provide clarifications to facilitate
implementation.
A. Technical Comments and
Clarifications Necessary for
Implementation
Comment: Extend the implementation
period and foreclosure timeframe or
institute a moratorium until FHA has
addressed industry comments and
provided systems support for the policy
changes.
HUD Response: HUD does not believe
that a delay in implementation is
needed or advisable at this time, nor is
there a need for any moratorium.
System changes are in progress and will
be available before June 1, 2015, which
is the date that assignments made
pursuant to Mortgagee Letter 2015–03
will begin to be accepted by HUD.
Additionally, HUD believes that any
further delay in implementation has the
potential to negatively impact NonBorrowing Spouses because interest will
continue to accrue during such delays,
resulting in an increase in the
outstanding principal balances and the
potential for such balances to exceed the
amount permissible in connection with
MOE Assignments.
Comment: Clarification needed
regarding notification to HUD.
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Commenter questions whether the
notification to HUD is only required if
the mortgagee is opting to utilize the
MOE Assignment, or the mortgagee
must notify HUD of their election or
non-election of the MOE Assignment in
all instances when the HECM has been
called due and payable as a result of the
death of the last remaining borrower.
HUD Response: The mortgagee must
notify the Secretary in HERMIT: (1)
When it elects to proceed to foreclosure
instead of utilizing the MOE
Assignment made available by
Mortgagee Letter 2015–03; (2) when it
elects to utilize the MOE Assignment
made available by the mortgagee letter;
and (3) when, after it elects to proceed
with the MOE Assignment, it
determines that a HECM or a surviving
Non-Borrowing Spouse is ineligible.
Comment: Clarification needed
regarding the availability of extensions
and the process for obtaining them.
Commenter questions whether or not
HUD will offer extensions of additional
time beyond the 90 days from the HECM
borrower’s death in order for the NonBorrowing Spouse to obtain good,
marketable title to the property, or
otherwise establish a right to occupy the
property. If so, commenter asks HUD to
clarify how a servicer requests an
extension, and suggests that HERMIT is
the appropriate manner to request an
extension.
HUD Response: HUD would like to
confirm that Mortgagee Letter 2015–03
does not require a surviving NonBorrowing Spouse to obtain legal title to
the mortgaged property in order to
qualify as an Eligible Surviving NonBorrowing Spouse. A surviving NonBorrowing Spouse must obtain either
legal title to the mortgaged property or
some other legal right to remain within
90 days of the death of the last surviving
borrower. Where a surviving NonBorrowing Spouse is unable to obtain
legal title, the surviving Non-Borrowing
Spouse must be able to establish some
other legal right to remain in the
mortgaged property. Any extensions to
any of the timeframes stated in
Mortgagee Letter 2015–03 are at the sole
discretion of the Secretary. Any
extension request must be made in
writing, before the expiration of the
initial timeframe, and must show good
cause.
Comment: Clarification needed
regarding the effect of extensions on
curtailment. Commenter asks HUD to
clarify whether or not an extension,
provided that HUD allows for
extensions in order to afford a NonBorrowing Spouse an extension of time
to obtain good, marketable title to the
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property, will cause curtailment to a
mortgage insurance claim.
HUD Response: HUD would like to
again confirm that Mortgagee Letter
2015–03 does not require a surviving
Non-Borrowing Spouse to obtain legal
title to the mortgaged property in order
to qualify as an Eligible Surviving NonBorrowing Spouse. A surviving NonBorrowing Spouse must obtain either
legal title to the mortgaged property or
some other legal right to remain within
90 days of the death of the last surviving
borrower. Where a surviving NonBorrowing Spouse is unable to obtain
legal title, the surviving Non-Borrowing
Spouse must be able to establish some
other legal right to remain in the
mortgaged property.
Additionally, Mortgagee Letter 2015–
03 implements an alternative Due Date
for HECMs eligible under Mortgagee
Letter 2015–03. Any extensions to any
of the timeframes stated in Mortgagee
Letter 2015–03 are at the sole discretion
of the Secretary. Any extension request
must be made in writing, before the
expiration of the initial timeframe, and
must show good cause. Where an
extension request is received and
granted in writing, it will operate in the
same manner as approved extensions
currently operate.
Comment: Clarification needed
regarding who is responsible for the
costs of any title searches. Commenter
asks HUD to clarify who is responsible
for the cost of the title search to verify
good, marketable title has been obtained
by the Non-Borrowing Spouse.
Commenter asks whether or not this
expense can be charged to the loan and
thus be reimbursed to the mortgagee
through the claims process. Commenter
asserts that HERMIT will not allow an
assignment of a loan to HUD that
contains post due and payable expenses.
HUD Response: HUD appreciates the
opportunity to provide this clarification.
HECM proceeds are not available after
the death of the last surviving borrower.
As such, HECM proceeds may not be
used to cover any additional expense
that may be incurred during the MOE
Assignment process. Any costs or
expenses must be paid outside of the
HECM loan and will not be reimbursed
in HUD claims.
Mortgagee Letter 2015–03 does not
place any restrictions or requirements
on the source of funds to pay for any
additional expenses that may be
incurred. Similarly, Mortgagee Letter
2015–03 places no restrictions or
requirements on the manner in which
an outstanding loan balance may be
brought into compliance with the
Principal Limit Test.
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Comment: Documentation of a
common law marriage should be
established by the Non-Borrowing
Spouse through a letter from legal
counsel or an affidavit of the NonBorrowing Spouse, and the servicing
mortgagee should be able to rely on that
documentation.
HUD Response: HUD appreciates the
comment; however, HUD has
determined not to make changes to the
documentation requirements of
Mortgagee Letter 2015–03. Mortgagee
Letter 2015–03 requires the mortgagee to
provide either a Marriage Certificate, a
legal opinion certifying the validity of
the marriage, or other evidence
sufficient to establish the legal validity
of the marriage. An affidavit from a
Non-Borrowing Spouse is sufficient
evidence of cohabitation or other purely
factual circumstances but is not
sufficient to demonstrate the legal effect
of that cohabitation or those other
circumstances to create a common law
marriage under applicable law. Where
an affidavit is used, a mortgagee would
also need to provide documentation that
applicable state law recognizes common
law marriage and that the facts recited
in the affidavit sufficiently establish a
valid marriage meeting all of the
requirements of Mortgagee Letter 2015–
03. Again, Mortgagee Letter 2015–03
places no restrictions on the source of
funds used to obtain any requisite legal
opinion.
Comment: Clarification needed
regarding the availability of the 95%
payoff to a Non-Borrowing Spouse on
title to the property at the time of the
death of the borrower. Commenter notes
that the Eligible Surviving NonBorrowing Spouse may elect to satisfy
the HECM loan and retain the property
for the lesser of the unpaid principal
balance of the loan or 95% of the
property’s appraised value, and asks
whether or not that 95% payoff is
available to the Non-Borrowing Spouse
even if the Non-Borrowing Spouse is on
title to the property at the time of the
death of the borrower.
HUD Response: HUD confirms that, as
provided in Mortgagee Letter 2015–03,
any heir including a Non-Borrowing
Spouse who is on title to the property
may satisfy the HECM and retain the
property for the lesser of the
outstanding loan balance or 95% of the
property’s appraised value. In the case
of purchases financed in part by a new
HECM, 24 CFR 206.53 will apply.
Comment: Clarification needed
regarding whether or not HUD will
provide mortgagees an extension to the
time period in which they must make
and notify HUD of the MOE Assignment
election.
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HUD Response: HUD appreciates the
opportunity to provide certain
clarifications through this Federal
Register notice. As a result, HUD is
providing mortgagees with an extension
following the publication of this notice
of the timeframe in which mortgagees
must notify HUD of their election where
the borrower had already died as of the
date of publication of this notice. Thus,
mortgagees must make their election
within the later of 120 days of the
issuance of Mortgagee Letter 2015–03 or
30 days after the servicer receives notice
of the last surviving borrower’s death.
Any additional extension to this
timeframe is at the sole discretion of
HUD. Any additional extension request
must be made in writing, before the
expiration of the initial timeframe or
within ten days of the mortgagee’s
discovery of the surviving NonBorrowing Spouse, and must show good
cause. The good cause shown for any
such request must include a cogent
explanation of why the surviving NonBorrowing Spouse was not discovered
sooner and could not have been
discovered sooner with the exercise of
reasonable diligence.
Comment: Clarification needed
regarding how loan documents could be
modified when the person(s) who
executed those documents are deceased.
Commenters note that the person(s) who
executed the loan documents would be
deceased and it is unclear how such a
loan contract could be modified after a
party to the contract is deceased. One
commenter requests that HUD not use
the term ‘‘modification’’ since it has a
precise legal meaning. Commenters
request clarification from HUD as to
how the loan documents may be
modified and documented, and seek
other options to achieve HUD’s
intention in this section, suggesting the
possibility of a loan assumption or
tolling agreement. Finally, the
commenter asks, where the
requirements may result in additional
third party expenses, whether those
expenses may be reimbursable through
either the assignment claim or other
claim type if it is determined that the
loan is not eligible for a MOE
Assignment.
HUD Response: HUD would like to
confirm that Mortgagee Letter 2015–03
does not require a mortgagee to modify
the loan documents. However, as stated
in Mortgagee Letter 2015–03, in order to
perfect an assignment claim, a
mortgagee must be able to certify that it
is, in fact, assigning a valid, legally
enforceable first lien. The mortgagee
must take whatever steps it deems
necessary to ensure that its certification
is truthful, which may or may not
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include modifying the loan documents,
depending on the circumstances and on
state law. Once again, Mortgagee Letter
2015–03 places no restrictions on the
source of funds used to obtain any
requisite documentation or to fulfill any
requisite conditions.
Comment: Clarification needed
regarding the timing of the HERMIT
system upgrades.
HUD Response: The HERMIT release
to accommodate the requirements of
Mortgagee Letter 2015–03 will occur
prior to the June 1, 2015, date indicated
in the mortgagee letter.
Comment: Clarification needed
regarding whether the HERMIT system
upgrades will include functionality to
accept a MOE Assignment of the case if
the last remaining borrower passes away
prior to the case reaching 98% of the
Maximum Claim Amount (MCA).
HUD Response: The HERMIT system
updates will include functionality
necessary to accept a MOE Assignment
of the case if the last remaining
borrower passes away prior to the case
reaching 98% of the MCA. Any
assignment under the MOE Assignment
must be initiated within 90 days from
the MOE Assignment election or within
180 days of the publication date of
Mortgagee Letter 2015–03, whichever is
later.
Comment: Clarification needed
regarding whether or not MOE
Assignments can be made when the
unpaid principal balance exceeds 100%
of the MCA.
HUD Response: HUD would like to
confirm that, as stated in Mortgagee
Letter 2015–03, in order for a HECM to
be eligible for a MOE Assignment, the
outstanding loan balance may not
exceed the MCA. A HECM with an
outstanding loan balance greater than
the MCA may become eligible, provided
that the outstanding loan balance at the
time of assignment does not exceed the
MCA and all other conditions and
requirements for a MOE Assignment are
met.
Comment: FHA’s servicing contractor,
NOVAD, should be equipped and
trained to approve requests for
assignment quickly when the MOE
Assignment election is utilized, as
servicers are only given 90 days to
determine eligibility, gather additional
documents, potentially modify the loan,
and assign the claim to HUD.
HUD Response: HUD appreciates the
comment. HUD’s loan servicing
contractor is receiving the necessary
information in order to review
assignment requests pursuant to
Mortgagee Letter 2015–03. This review
will include an examination of the
applicable timeframes, the initiation
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process, and all required
documentation.
Comment: Clarification needed
regarding the calculation of the current
principal limit for the Non-Borrowing
Spouse. Commenters ask whether or not
the calculation of the current principal
limit for the Non-Borrowing Spouse
should include the calculated growth to
the principal limit and seek clarification
as to how mortgagees should apply
funds in cases where a payment may be
used to reduce the unpaid principal
balance. Commenters seek examples of
such ‘‘pay down’’ scenarios and the
specific transaction code in HERMIT
that should be used.
HUD Response: As stated in
Mortgagee Letter 2015–03, there are two
different tests that are applicable and
only one of the tests must be satisfied
in order for a HECM to be eligible for
a MOE Assignment. The two tests are
the Factor Test and the Principal Limit
Test. The Factor Test compares what the
principal limit factor (PLF) 1 would have
been at origination had the Eligible
Surviving Non-Borrowing Spouse been
a borrower. If the Eligible Surviving
Non-Borrowing Spouse’s PLF would
have been greater than or equal to the
deceased borrower’s PLF at origination,
the test is satisfied. The Factor Test does
not take into consideration the growth
of the principal limit.
The Principal Limit Test does take
into account the calculated growth. The
growth must be calculated by using
what the PLF, in addition to the initial
principal limit, would have been had
the Eligible Surviving Non-Borrowing
Spouse been a borrower at origination.
In order to satisfy the Principal Limit
Test, the outstanding loan balance must
be equal to or less than what the
principal limit would have been for the
Eligible Surviving Non-Borrowing
Spouse at the time the loan became due
and payable due to the death of the last
surviving borrower. Mortgagee Letter
2015–03 does not place restrictions or
requirements on the source of funds that
may be used to bring the outstanding
loan balance in compliance with the
Principal Limit Test. Additionally,
Mortgagee Letter 2015–03 places no
restrictions or requirements on the
manner in which an outstanding loan
balance may be brought into compliance
with the Principal Limit Test. There
will, however, be no new transaction
codes in HERMIT.
Comment: Clarification needed
regarding whether or not a mortgagee
may pay down the balance of a HECM
1 Principal Limit Factor tables are available here:
https://portal.hud.gov/hudportal/HUD?src=/
program_offices/housing/sfh/hecm.
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loan in order to allow a Non-Borrowing
Spouse to meet the Principal Limit Test.
Commenter notes that under current
practice, HUD will not accept a 98%
Assignment if the mortgagee has paid
taxes or insurance on behalf of the
borrower, and seeks clarification
regarding whether these restrictions will
apply under Mortgagee Letter 2015–03.
Commenter asks HUD to confirm
whether or not they will accept MOE
Assignments when (1) the mortgagee
has contributed amounts toward the
PLF Pay Down; (2) the mortgagee has
contributed amounts to satisfy taxes,
insurance, Home Owners Association
fees and condominium assessments due
and paid at any time prior to completing
a MOE Assignment; and (3) the
mortgagee has contributed amounts to
satisfy attorney fees, court costs,
appraisal fees, inspection fees, etc.,
incurred by the mortgagee prior to
completing the MOE Assignment.
HUD Response: Mortgagee Letter
2015–03 does not place restrictions or
requirements on the source of funds that
may be used to bring the outstanding
loan balance in compliance with the
Principal Limit Test. Additionally,
Mortgagee Letter 2015–03 places no
restrictions or requirements on the
manner in which an outstanding loan
balance may be brought into compliance
with the Principal Limit Test. The
mortgagee letter does, however, require
that the outstanding loan balance be less
than the MCA and that either the Factor
Test or Principal Limit Test is satisfied.
Comment: Because all states generally
have a statute of limitations for
mortgage foreclosures or collecting or
realizing on a mortgage loan, the use of
a document by a mortgagee with a NonBorrowing Spouse, such as a tolling
agreement, should be a qualifying
attribute for the Non-Borrowing Spouse
to make a HECM loan eligible for a MOE
Assignment.
HUD Response: In order to perfect a
MOE Assignment claim, a mortgagee
must be able to certify that it is, in fact,
assigning a valid, legally enforceable
first lien that will remain valid and
legally enforceable throughout the
lifetime of the Eligible Surviving NonBorrowing Spouse. The mortgagee must
take whatever steps it deems necessary
under the laws of the jurisdiction in
which the property is situated to ensure
that its certification is truthful, which
may include obtaining a tolling
agreement.
Comment: Clarification needed
regarding meaning of ‘‘judicially
resolved’’. Commenter asks if the
judgment must be entered in the
mortgagee’s favor, or if a dismissal with
prejudice would be sufficient.
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Commenter also requests clarity
regarding whether HUD is requiring or
expecting that the Non-Borrowing
Spouse will sign a release or waiver for
these instances.
HUD Response: HUD appreciates the
opportunity to address this concern.
Mortgagee Letter 2015–03 requires a
mortgagee to provide documentation
that supports an affirmation that no
allegations that would invalidate the
HECM mortgage exist or if there were
such allegations, evidence of their
judicial resolution in favor of the
mortgagee. A dismissal with prejudice
would suffice for evidence of a judicial
resolution in favor of the mortgagee. A
judicially approved settlement of all
claims against the mortgagee would also
suffice. Mortgagee Letter 2015–03 does
not require a surviving Non-Borrowing
Spouse to sign a release or a waiver.
However, a mortgagee is required to
certify that it is, in fact, assigning a
valid, legally enforceable first lien. The
mortgagee must take whatever steps it
deems necessary to ensure that its
certification is truthful.
Comment: Clarification needed
regarding reinstatement of a MOE
Assignment Deferral Period.
HUD Response: Where an obligation
under the terms of the mortgage has not
been met prior to completion of a MOE
Assignment, the MOE Assignment
Deferral Period ceases and the HECM is
not eligible for a MOE Assignment
unless and until the MOE Assignment
Deferral Period is reinstated. Thus,
where a missed obligation is
subsequently cured, the MOE
Assignment Deferral Period may be
reinstated and the MOE Assignment
process may proceed.
Comment: HUD should provide
examples of the required certifications
and other timeframes.
HUD Response: HUD confirms that
model language for the required
certifications was provided in the text of
Mortgagee Letter 2015–03 and remains
valid for use in connection with a MOE
Assignment.
Comment: Clarification needed
regarding First Legal Due Date.
(a) Commenter seeks clarification as
to whether or not a mortgagee’s
reporting requirements of the election to
take a MOE Assignment extend all of
the current HECM servicing reporting
timelines that impact claim curtailment,
including but not limited to undertaking
and reporting first legal action or
ordering a due and payable appraisal.
Commenter also requests that these
adjusted timelines be automatically
captured in HERMIT, thus avoiding an
auto-curtailment in HERMIT which
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would further necessitate retrieving the
curtailment on a supplemental claim.
Commenter asks HUD to clarify that
that the ‘‘Due Date’’ for purposes of
payment of claim means the date when
a mortgagee notifies HUD under
Mortgagee Letter 2015–03 that it has
determined not to utilize the MOE
Assignment, or, if applicable, that it has
elected the MOE Assignment but then
determined that the mortgage is not
eligible for assignment because all
established conditions and requirements
for the MOE Assignment are not met,
and that this timeline applies to all
curtailable events.
HUD Response: The Due Date for
purposes of payment of claim means the
date when a mortgagee notifies HUD
that it has determined not to utilize the
MOE Assignment, or, if applicable, that
it has elected the MOE Assignment but
then determined that the mortgage is not
eligible for assignment because all
established conditions and requirements
for the MOE Assignment are not met.
All subsequent required timeframes are
determined in relation to this Due Date.
HUD would like to reiterate mortgagees
that any election made pursuant to
Mortgagee Letter 2015–03 must be made
within the later of 120 days of the
issuance of Mortgagee Letter 2015–03 or
30 days after the servicer receives notice
of the last surviving borrower’s death.
As such, where a mortgagee does not
elect to utilize the MOE Assignment,
and instead elects to proceed in
accordance with the HECM documents,
the Due Date may not exceed the later
of 120 days of the issuance of Mortgagee
Letter 2015–03 or 30 days after the
servicer receives notice of the last
surviving borrower’s death, as provided
in that mortgagee letter.
(b) Commenter asks HUD to clarify
that, following the election of the MOE
Assignment and the assessment and
determination that a Non-Borrowing
Spouse is ineligible for a MOE
Assignment Deferral Period, the
timeline for First Legal Action is
automatically extended, in addition to
any additional time that may be allowed
by the Secretary, beyond this
automatically extended time period.
Commenter requests that HUD clarify
the manner in which a servicing
mortgagee should update HERMIT with
this information to avoid a claim being
automatically curtailed to the date six
months from the death of the last
surviving borrower. Commenter also
requests that HUD clarify which dates
should be provided for the date the
servicing mortgagee notified HUD of the
death (Block 29) and the expiration of
the extension (Block 19) in such cases
in order to avoid curtailment.
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HUD Response: Under Mortgagee
Letter 2015–03, where a mortgagee
elects the MOE Assignment and
subsequently determines that either the
HECM or the surviving Non-Borrowing
Spouse is not eligible for a MOE
Assignment, the Due Date for claim
purposes is considered to be the date
that such a determination was made. All
subsequently required timeframes,
including the timeframes regarding First
Legal Action, are determined in relation
to the Due Date.
The User Assistance Test (UAT) for
the HERMIT changes will occur in
Spring 2015, as the scheduled release
date is targeted for April 25, 2015. The
process expected to be in effect at that
time is as follows: To change the ‘‘Due
Date’’ in HERMIT, the User will access
the ‘‘Contact Tab’’ and un-check the
‘‘Eligible NBS’’ box, causing the Due &
Payable without HUD Approval
Timeline to be created, with a reason of
‘‘Death’’. The loan status will be
updated to ‘‘Due & Payable’’ and the
date the box is un-checked will become
the new ‘‘Due Date’’.
(c) Commenter requests clarification
regarding the time period for
commencement of First Legal Action for
loans which previously had extensions
but are now under the time periods
provided in Mortgagee Letter 2015–03.
Commenter notes that there are many
cases that have been on a NonBorrowing Spouse extension and
questions whether First Legal Action for
these loans restarts as of Mortgagee
Letter 2015–03. When must First Legal
Action be completed to avoid interest
curtailment?
HUD Response: As provided in
Mortgagee Letter 2015–03, all
extensions provided by FHA Info 14–34
have expired. No further extensions are
permissible under FHA Info 14–34.
Mortgagees must proceed in accordance
with the timeframes established in
Mortgagee Letter 2015–03.
Comment: Clarification needed
regarding whether or not a HECM loan
will be eligible for a MOE Assignment
Deferral Period if the Non-Borrowing
Spouse files for bankruptcy protection.
Commenter also seeks clarification as to
whether the MOE Assignment eligibility
will be delayed until after the
bankruptcy petition or procedure is
dismissed (similar to the requirement to
complete First Legal Action in 24 CFR
206.125(d)(2)) or whether a NonBorrowing Spouse that files for
bankruptcy is ineligible for the MOE
Assignment unless the bankruptcy is
dismissed within the stated guidelines.
HUD Response: HUD would like to
clarify that the outstanding loan balance
of a HECM is not a debt owed by a non-
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borrower. Only a borrower is obligated
to satisfy a HECM. Further, a HECM is
a non-recourse loan and as such, no
borrower, or borrower’s estate, is
personally liable for any amounts that
may exceed the proceeds received from
the subsequent sale of the mortgaged
property. Further, any amount that may
be required to bring the outstanding
loan balance of a HECM in compliance
with the Principal Limit Test, in order
to be eligible for a MOE Assignment, is
similarly not a debt owed by a nonborrower. Thus, any such amount
cannot be included as a debt owed by
a Non-Borrowing Spouse filing for
bankruptcy. To the extent a mortgagee
believes that the automatic stay
provision may apply, the mortgagee may
take whatever steps it deems necessary
to ensure that communication with the
Non-Borrowing Spouse would not
violate the automatic stay. Regardless, a
mortgagee must make its election within
the later of 120 days of the issuance of
Mortgagee Letter 2015–03 or 30 days
after the servicer receives notice of the
last surviving borrower’s death,
whichever is later. As also stated in
Mortgagee Letter 2015–03, any
extension to this timeframe is at the sole
discretion of HUD.
Comment: FHA should consider
initiation of the assignment to occur
when the loan is uploaded for selection
in HERMIT.
HUD Response: HUD considers
assignment initiated when a complete
assignment request is uploaded in
HERMIT. A complete assignment
request includes all of the required
documents identified in Mortgagee
Letter 2015–03.
B. Additional Options and Other
Comments
Comment: Voluntary nature of the
MOE Assignment is problematic.
Commenters note that the MOE
Assignment election is left to the
discretion of the mortgagee, and
mortgagees are unlikely to select that
option. One commenter specifically
notes that the lack of guidance and
clarity, coupled with the fact that
lenders must indemnify HUD for any
errors, make lenders unlikely to exercise
the MOE Assignment option.
HUD Response: As stated in
Mortgagee Letter 2015–03, HUD cannot
interfere with the private contractual
rights retained by the mortgagees.
Further, as the mortgagee is the party to
the contract of insurance, it is solely
within the discretion of the mortgagee
whether to elect to amend its contract of
mortgage insurance under the MOE
Assignment or to proceed in accordance
with the loan documents as endorsed.
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Currently, for any claim for insurance
benefits filed by a mortgagee,
mortgagees are subject to unwinding of
a filed claim where the conditions for
that claim have not been met. This
typical requirement is extended to the
MOE Assignment just as it would be on
an ordinary assignment or claim.
Comment: MOE Assignment is not an
adequate alternative to foreclosure and
HUD should provide alternative relief.
Commenters state that by requiring the
Non-Borrowing Spouse to meet the
Principal Limit Test in order to qualify
for assignment of the loan, HUD is
putting forth an option that the majority
of surviving Non-Borrowing Spouses
cannot benefit from. Commenters
identify the uncertainty with calculating
the PLF and growth rate, the cost of
reducing the principal balance, and the
short deadline by which the NonBorrowing Spouse must meet the
Principal Limit Test as obstacles.
Commenters urge HUD to provide
alternative options to protect NonBorrowing Spouses, such as the Hold
Election. One commenter suggests that
HUD could satisfy the HECM by paying
the lesser of the unpaid principal
balance or 95% of the property’s
appraised value on behalf of the
deceased borrower and then take a new
mortgage interest due upon the NonBorrowing Spouse’s death. Another
commenter recommends that HUD
allow Non-Borrowing Spouses to remain
in the home and pay a portion of the
interest accruing on the loan based on
their ability to pay; HUD would accept
early assignment of the loan and defer
the due and payable status of the loan
so long as the Non-Borrowing Spouse
pays a portion of the interest accruing
on the loan and fulfills the obligations
under the mortgage. Commenter also
recommends that HUD allow surviving
Non-Borrowing Spouses to pay money
to reduce the unpaid principal balance
to meet the requirements of the
Principal Limit Test over time, rather
than in one large, lump-sum payment;
HUD would accept early assignment of
the loan, defer the due and payable
status of the loan and allow the
surviving spouse to pay the necessary
amount over a period of years.
HUD Response: As previously stated,
HUD cannot interfere in private
mortgage contracts. HUD also has a
statutory obligation to ensure the fiscal
soundness of the FHA insurance funds,
and as such, cannot ignore its fiduciary
duty to the fund. HUD has provided
what it believes permissible, while
recognizing the sanctity of private
contractual relationships and upholding
its statutory obligation to ensure the
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17:18 Apr 28, 2015
Jkt 235001
fiscal soundness of the FHA insurance
funds.
Additionally, as stated previously,
Mortgagee Letter 2015–03 does not
place restrictions or requirements on the
source of funds that may be used to
bring the outstanding loan balance in
compliance with the Principal Limit
Test, or the manner in which an
outstanding loan balance may be
brought into compliance with the
Principal Limit Test. However, the
mortgagee letter does require that the
outstanding loan balance not exceed the
MCA and that either the Factor Test or
the Principal Limit Test is satisfied at
the time of assignment.
Finally, as noted above, HECM loans
are non-recourse and cannot result in a
deficiency judgment against any party.
A HECM foreclosure that may occur as
a result of the last surviving borrower’s
death should not constitute a reportable
event in the credit file of either the
borrower’s estate or the surviving NonBorrowing Spouse.
Comment: Additional procedural
protections are needed for NonBorrowing Spouses. Commenter asserts
that 90 days to obtain good, marketable
title is not enough time and the proof of
title that is required should be
reasonable. Commenter urges HUD to
make clear that marketable title is not
the same thing as probate, and an
opinion letter from a Title Company or
a licensed attorney practicing probate
law in the jurisdiction should suffice to
establish ‘‘marketable’’ title.
HUD Response: HUD would like to
confirm that Mortgagee Letter 2015–03
does not require a surviving NonBorrowing Spouse to obtain legal title to
the mortgaged property in order to
qualify as an Eligible Surviving NonBorrowing Spouse. A surviving NonBorrowing Spouse must obtain either
legal title to the mortgaged property or
some other legal right to remain within
90 days of the death of the last surviving
borrower. Where a surviving NonBorrowing Spouse is unable to obtain
legal title, the surviving Non-Borrowing
Spouse must be able to establish some
other legal right to remain in the
mortgaged property.
Comment: HUD should instruct
servicers about how to communicate
with surviving Non-Borrowing Spouses.
Commenter notes that servicers need to
improve communications with
surviving Non-Borrowing Spouses, and
that HUD should provide explicit
instructions to servicers about how to
adequately communicate with surviving
Non-Borrowing Spouses.
HUD Response: HUD does not
instruct servicers how to communicate.
HUD would expect servicers to
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23813
communicate with the representatives
of deceased borrowers. HUD further
expects that servicers would comply
with all Federal and state laws and
requirements regarding mortgage
servicing, including those of the
Consumer Financial Protection Bureau.
Comment: Data has not been provided
to support HUD’s assertion that
providing the Hold Election to all
surviving Non-Borrowing Spouses
would be too costly. Commenters assert
that HUD should provide all data,
assumptions, calculations, conclusions
and alternatives explored that relate to
the cost of providing the Hold Election
to all surviving Non-Borrowing Spouses.
HUD Response: HUD’s risk analysis
indicates that the Hold Election, if
broadly applied to all pre-August 4,
2014, HECMs where a Non-Borrowing
Spouse remains in residence after the
borrower’s death, would produce much
more substantial losses for the insurance
funds than would likely be generated by
the extension of the MOE Assignment to
all such HECMs. Using data from the
2010 Survey of Consumer Finances,
HUD estimated that about 20% of
HECM borrowers are married to nonborrowing spouses.2 On the basis of the
correct data regarding HECM borrowers
with non-borrowing spouses, along with
data from the Centers for Disease
Control to estimate life expectancies of
the borrowing and non-borrowing
spouses, and assuming no further cash
draws after the borrowing spouse exits
the home and other reasonable
assumptions, HUD estimated the
potential cost of the Hold Election to the
insurance funds to be $1.769 billion if
it were made broadly available to all
surviving, non-borrowing spouses and
accepted by them. Using the same
assumptions, consistently applied, HUD
estimated the potential cost of the MOE
Assignment to the funds to be $439
million if it were made broadly
available to all surviving, nonborrowing spouses and accepted by
them. While both figures are estimates,
HUD is highly confident of the order of
magnitude of the difference between the
two figures.
Comment: Provide notice and
information to HECM borrowers and
their spouses regarding the risk of
displacement and their rights under the
HECM statute.
2 The February 2015 Determination on Remand
submitted to the District Court in the Plunkett case
incorrectly stated this as ‘‘20% of the married
seniors in the HECM program’’ being married to
non-borrowing spouses; however, this was a
drafting error which played no part in HUD’s actual
cost calculation. That calculation was based on the
assumption that 20% of all borrowers in the HECM
program had non-borrowing spouses.
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HUD Response: HUD appreciates the
opportunity to address this concern. All
mortgagee letters, including Mortgagee
Letters 2015–03, 2015–02, and 2014–07,
are public documents and are available
to the public on HUD’s Web site. HUD
also published notices soliciting public
comment on MLs 2015–03 and 2014–07
in the Federal Register, which provided
additional notice of HUD’s HECM
policy changes related to NonBorrowing Spouses. Finally, HUD notes
that prospective HECM borrowers must
receive housing counseling to be eligible
for a HECM, and would like to remind
current HECM borrowers and their
spouses that they may speak with
housing counselors at any time.
Dated: April 24, 2015.
Edward L. Golding,
Principal Deputy Assistant Secretary for
Housing.
[FR Doc. 2015–10019 Filed 4–28–15; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
[FWS–HQ–NWRS–2014–N251;
FXRS126309WHHC0–FF09R81000–156]
Wildlife and Hunting Heritage
Conservation Council; Public Meeting
Fish and Wildlife Service,
Interior.
ACTION: Notice of meeting.
AGENCY:
We, the U.S. Fish and
Wildlife Service, announce a public
meeting of the Wildlife and Hunting
Heritage Conservation Council
(Council). The Council provides advice
about wildlife and habitat conservation
endeavors that benefit wildlife
resources; encourage partnership among
the public, the sporting conservation
organizations, the States, Native
American tribes, and the Federal
Government; and benefit recreational
hunting.
DATES: Meeting: Tuesday June 9, 2015,
from 8 a.m. to 4:30 p.m., and
Wednesday June 10, 2015, from 8 a.m.
to 1 p.m. (Alaska daylight time). For
deadlines and directions on registering
to attend, requesting reasonable
accommodations, submitting written
material, and giving an oral
presentation, please see ‘‘Public Input’’
under SUPPLEMENTARY INFORMATION.
ADDRESSES: The meeting will be held in
the Kenai National Wildlife Refuge
Visitor’s Center, Ski Hill Road,
Soldotna, Alaska 99669.
FOR FURTHER INFORMATION CONTACT:
Joshua Winchell, Council Designated
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SUMMARY:
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17:18 Apr 28, 2015
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Federal Officer, U.S. Fish and Wildlife
Service, National Wildlife Refuge
System, 5275 Leesburg Pike, Falls
Church, VA 22041–3803; telephone
(703) 358–2639; or email joshua_
winchell@fws.gov.
SUPPLEMENTARY INFORMATION: In
accordance with the requirements of the
Federal Advisory Committee Act, 5
U.S.C. App., we announce that Wildlife
and Hunting Heritage Conservation
Council will hold a meeting.
Background
Formed in February 2010, the Council
provides advice about wildlife and
habitat conservation endeavors that:
1. Benefit wildlife resources;
2. Encourage partnership among the
public, the sporting conservation
organizations, the states, Native
American tribes, and the Federal
Government; and
3. Benefit recreational hunting.
The Council advises the Secretary of
the Interior and the Secretary of
Agriculture, reporting through the
Director, U.S. Fish and Wildlife Service
(Service), in consultation with the
Director, Bureau of Land Management
(BLM); Director, National Park Service
(NPS); Chief, Forest Service (USFS);
Chief, Natural Resources Service
(NRCS); and Administrator, Farm
Services Agency (FSA). The Council’s
duties are strictly advisory and consist
of, but are not limited to, providing
recommendations for:
1. Implementing the Recreational
Hunting and Wildlife Resource
Conservation Plan—A Ten-Year Plan for
Implementation;
2. Increasing public awareness of and
support for the Wildlife Restoration
Program;
3. Fostering wildlife and habitat
conservation and ethics in hunting and
shooting sports recreation;
4. Stimulating sportsmen and
women’s participation in conservation
and management of wildlife and habitat
resources through outreach and
education;
5. Fostering communication and
coordination among State, tribal, and
Federal governments; industry; hunting
and shooting sportsmen and women;
wildlife and habitat conservation and
management organizations; and the
public;
6. Providing appropriate access to
Federal lands for recreational shooting
and hunting;
7. Providing recommendations to
improve implementation of Federal
conservation programs that benefit
wildlife, hunting, and outdoor
recreation on private lands; and
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8. When requested by the Designated
Federal Officer in consultation with the
Council Chairperson, performing a
variety of assessments or reviews of
policies, programs, and efforts through
the Council’s designated subcommittees
or workgroups.
Background information on the
Council is available at https://
www.fws.gov/whhcc.
Meeting Agenda
The Council will convene to consider
issues including:
1. Public access on federal
conservation easements;
2. recent changes to the Federal
Migratory Bird Hunting and
Conservation Stamp program; and
3. Other Council business.
The final agenda will be posted on the
Internet at https://www.fws.gov/whhcc.
PUBLIC INPUT
If you wish to
Attend the meeting ....
Submit written information or questions
before the meeting
for the council to
consider during the
meeting.
Give an oral presentation during the
meeting.
You must contact the
Council Coordinator
(see FOR FURTHER
INFORMATION
CONTACT) no later
than
May 27, 2015.
May 27, 2015.
May 27, 2015.
Attendance
To attend this meeting, register by
close of business on the dates listed in
‘‘Public Input’’ under SUPPLEMENTARY
INFORMATION. Please submit your name,
time of arrival, email address, and
phone number to the Council
Coordinator (see FOR FURTHER
INFORMATION CONTACT).
Submitting Written Information or
Questions
Interested members of the public may
submit relevant information or
questions for the Council to consider
during the public meeting. Written
statements must be received by the date
above, so that the information may be
made available to the Council for their
consideration prior to this meeting.
Written statements must be supplied to
the Council Coordinator in both of the
following formats: One hard copy with
original signature, and one electronic
copy via email (acceptable file formats
are Adobe Acrobat PDF, MS Word, MS
PowerPoint, or rich text file).
E:\FR\FM\29APN1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 82 (Wednesday, April 29, 2015)]
[Notices]
[Pages 23808-23814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10019]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5735-N-05]
Home Equity Conversion Mortgage (HECM) Program: Mortgagee
Optional Election Assignment for Home Equity Conversion Mortgages
(HECMs) With FHA Case Numbers Assigned Prior to August 4, 2014--
Response to Comments
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice; response to comments.
-----------------------------------------------------------------------
SUMMARY: On February 6, 2015, at 80 FR 6743, the Federal Housing
Administration (FHA) published a notice to solicit public comment on
the alternative path to claim payment--the Mortgagee Optional Election
Assignment--for certain HECMs announced in Mortgagee Letter 2015-03.
The public comment period on the February 6, 2015, notice closed on
March 9, 2015. FHA received 7 public comments on the notice. In this
notice, FHA responds to questions and comments raised by commenters.
FOR FURTHER INFORMATION CONTACT: Ivery Himes, Director, Office of
Single Family Asset Management, Office of Housing, Department of
Housing and Urban Development, 451 7th Street SW., Room 9172,
Washington, DC 20410; telephone number 202-708-1672 (this is not a
toll-free number). Persons with hearing or speech impairments may
access this number by calling the Federal Relay Service at 800-877-8339
(this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
FHA has a statutory obligation to ensure the fiscal soundness of
the FHA insurance funds. FHA also has the ability, pursuant to the
Reverse Mortgage Stabilization Act of 2013 (Pub. L. 113-29), to
establish, by notice or mortgagee letter, any additional or alternative
requirements that the Secretary, in the Secretary's discretion,
determines are necessary to improve the fiscal safety and soundness of
the HECM program, which requirements shall take effect upon issuance.
Pursuant to this authority, FHA established Mortgagee Letter 2015-
03 on January 29, 2015, for immediate effect. In Mortgagee Letter 2015-
03, FHA set out the Mortgagee Optional Election (MOE) Assignment path
to claim payment for existing HECMs with FHA Case Numbers issued prior
to August 4, 2014. FHA alerted mortgagees
[[Page 23809]]
that aside from the present procedures for either the sale of the home
or foreclosure of the HECM in accordance with the mortgage insurance
contract terms as originally endorsed, or the MOE Assignment
alternative, no other path to claim payment exists for HECMs with FHA
Case Numbers issued prior to August 4, 2014.
II. Discussion of the Public Comments Received on the February 6, 2015,
Notice
On February 6, 2015, at 80 FR 6743, FHA published a notice in the
Federal Register to solicit public comment on the HECM program changes
announced in Mortgagee Letter 2015-03. FHA received 7 public comments
on the notice. Comments were submitted by a HECM servicer, a national
reverse mortgage association, legal aid and advocacy organizations, and
other interested parties. In general, some commenters applaud and
support FHA's efforts to preserve the integrity of the insurance funds
in order to ensure the continued viability of the HECM program, while
providing protections to Non-Borrowing Spouses of deceased HECM
borrowers. However, commenters seek clarification on many policy and
systems issues, and ask FHA to consider alternative options. In this
notice, FHA takes the opportunity to respond to the public comments and
provide clarifications to facilitate implementation.
A. Technical Comments and Clarifications Necessary for Implementation
Comment: Extend the implementation period and foreclosure timeframe
or institute a moratorium until FHA has addressed industry comments and
provided systems support for the policy changes.
HUD Response: HUD does not believe that a delay in implementation
is needed or advisable at this time, nor is there a need for any
moratorium. System changes are in progress and will be available before
June 1, 2015, which is the date that assignments made pursuant to
Mortgagee Letter 2015-03 will begin to be accepted by HUD.
Additionally, HUD believes that any further delay in implementation has
the potential to negatively impact Non-Borrowing Spouses because
interest will continue to accrue during such delays, resulting in an
increase in the outstanding principal balances and the potential for
such balances to exceed the amount permissible in connection with MOE
Assignments.
Comment: Clarification needed regarding notification to HUD.
Commenter questions whether the notification to HUD is only required if
the mortgagee is opting to utilize the MOE Assignment, or the mortgagee
must notify HUD of their election or non-election of the MOE Assignment
in all instances when the HECM has been called due and payable as a
result of the death of the last remaining borrower.
HUD Response: The mortgagee must notify the Secretary in HERMIT:
(1) When it elects to proceed to foreclosure instead of utilizing the
MOE Assignment made available by Mortgagee Letter 2015-03; (2) when it
elects to utilize the MOE Assignment made available by the mortgagee
letter; and (3) when, after it elects to proceed with the MOE
Assignment, it determines that a HECM or a surviving Non-Borrowing
Spouse is ineligible.
Comment: Clarification needed regarding the availability of
extensions and the process for obtaining them. Commenter questions
whether or not HUD will offer extensions of additional time beyond the
90 days from the HECM borrower's death in order for the Non-Borrowing
Spouse to obtain good, marketable title to the property, or otherwise
establish a right to occupy the property. If so, commenter asks HUD to
clarify how a servicer requests an extension, and suggests that HERMIT
is the appropriate manner to request an extension.
HUD Response: HUD would like to confirm that Mortgagee Letter 2015-
03 does not require a surviving Non-Borrowing Spouse to obtain legal
title to the mortgaged property in order to qualify as an Eligible
Surviving Non-Borrowing Spouse. A surviving Non-Borrowing Spouse must
obtain either legal title to the mortgaged property or some other legal
right to remain within 90 days of the death of the last surviving
borrower. Where a surviving Non-Borrowing Spouse is unable to obtain
legal title, the surviving Non-Borrowing Spouse must be able to
establish some other legal right to remain in the mortgaged property.
Any extensions to any of the timeframes stated in Mortgagee Letter
2015-03 are at the sole discretion of the Secretary. Any extension
request must be made in writing, before the expiration of the initial
timeframe, and must show good cause.
Comment: Clarification needed regarding the effect of extensions on
curtailment. Commenter asks HUD to clarify whether or not an extension,
provided that HUD allows for extensions in order to afford a Non-
Borrowing Spouse an extension of time to obtain good, marketable title
to the property, will cause curtailment to a mortgage insurance claim.
HUD Response: HUD would like to again confirm that Mortgagee Letter
2015-03 does not require a surviving Non-Borrowing Spouse to obtain
legal title to the mortgaged property in order to qualify as an
Eligible Surviving Non-Borrowing Spouse. A surviving Non-Borrowing
Spouse must obtain either legal title to the mortgaged property or some
other legal right to remain within 90 days of the death of the last
surviving borrower. Where a surviving Non-Borrowing Spouse is unable to
obtain legal title, the surviving Non-Borrowing Spouse must be able to
establish some other legal right to remain in the mortgaged property.
Additionally, Mortgagee Letter 2015-03 implements an alternative
Due Date for HECMs eligible under Mortgagee Letter 2015-03. Any
extensions to any of the timeframes stated in Mortgagee Letter 2015-03
are at the sole discretion of the Secretary. Any extension request must
be made in writing, before the expiration of the initial timeframe, and
must show good cause. Where an extension request is received and
granted in writing, it will operate in the same manner as approved
extensions currently operate.
Comment: Clarification needed regarding who is responsible for the
costs of any title searches. Commenter asks HUD to clarify who is
responsible for the cost of the title search to verify good, marketable
title has been obtained by the Non-Borrowing Spouse. Commenter asks
whether or not this expense can be charged to the loan and thus be
reimbursed to the mortgagee through the claims process. Commenter
asserts that HERMIT will not allow an assignment of a loan to HUD that
contains post due and payable expenses.
HUD Response: HUD appreciates the opportunity to provide this
clarification. HECM proceeds are not available after the death of the
last surviving borrower. As such, HECM proceeds may not be used to
cover any additional expense that may be incurred during the MOE
Assignment process. Any costs or expenses must be paid outside of the
HECM loan and will not be reimbursed in HUD claims.
Mortgagee Letter 2015-03 does not place any restrictions or
requirements on the source of funds to pay for any additional expenses
that may be incurred. Similarly, Mortgagee Letter 2015-03 places no
restrictions or requirements on the manner in which an outstanding loan
balance may be brought into compliance with the Principal Limit Test.
[[Page 23810]]
Comment: Documentation of a common law marriage should be
established by the Non-Borrowing Spouse through a letter from legal
counsel or an affidavit of the Non-Borrowing Spouse, and the servicing
mortgagee should be able to rely on that documentation.
HUD Response: HUD appreciates the comment; however, HUD has
determined not to make changes to the documentation requirements of
Mortgagee Letter 2015-03. Mortgagee Letter 2015-03 requires the
mortgagee to provide either a Marriage Certificate, a legal opinion
certifying the validity of the marriage, or other evidence sufficient
to establish the legal validity of the marriage. An affidavit from a
Non-Borrowing Spouse is sufficient evidence of cohabitation or other
purely factual circumstances but is not sufficient to demonstrate the
legal effect of that cohabitation or those other circumstances to
create a common law marriage under applicable law. Where an affidavit
is used, a mortgagee would also need to provide documentation that
applicable state law recognizes common law marriage and that the facts
recited in the affidavit sufficiently establish a valid marriage
meeting all of the requirements of Mortgagee Letter 2015-03. Again,
Mortgagee Letter 2015-03 places no restrictions on the source of funds
used to obtain any requisite legal opinion.
Comment: Clarification needed regarding the availability of the 95%
payoff to a Non-Borrowing Spouse on title to the property at the time
of the death of the borrower. Commenter notes that the Eligible
Surviving Non-Borrowing Spouse may elect to satisfy the HECM loan and
retain the property for the lesser of the unpaid principal balance of
the loan or 95% of the property's appraised value, and asks whether or
not that 95% payoff is available to the Non-Borrowing Spouse even if
the Non-Borrowing Spouse is on title to the property at the time of the
death of the borrower.
HUD Response: HUD confirms that, as provided in Mortgagee Letter
2015-03, any heir including a Non-Borrowing Spouse who is on title to
the property may satisfy the HECM and retain the property for the
lesser of the outstanding loan balance or 95% of the property's
appraised value. In the case of purchases financed in part by a new
HECM, 24 CFR 206.53 will apply.
Comment: Clarification needed regarding whether or not HUD will
provide mortgagees an extension to the time period in which they must
make and notify HUD of the MOE Assignment election.
HUD Response: HUD appreciates the opportunity to provide certain
clarifications through this Federal Register notice. As a result, HUD
is providing mortgagees with an extension following the publication of
this notice of the timeframe in which mortgagees must notify HUD of
their election where the borrower had already died as of the date of
publication of this notice. Thus, mortgagees must make their election
within the later of 120 days of the issuance of Mortgagee Letter 2015-
03 or 30 days after the servicer receives notice of the last surviving
borrower's death. Any additional extension to this timeframe is at the
sole discretion of HUD. Any additional extension request must be made
in writing, before the expiration of the initial timeframe or within
ten days of the mortgagee's discovery of the surviving Non-Borrowing
Spouse, and must show good cause. The good cause shown for any such
request must include a cogent explanation of why the surviving Non-
Borrowing Spouse was not discovered sooner and could not have been
discovered sooner with the exercise of reasonable diligence.
Comment: Clarification needed regarding how loan documents could be
modified when the person(s) who executed those documents are deceased.
Commenters note that the person(s) who executed the loan documents
would be deceased and it is unclear how such a loan contract could be
modified after a party to the contract is deceased. One commenter
requests that HUD not use the term ``modification'' since it has a
precise legal meaning. Commenters request clarification from HUD as to
how the loan documents may be modified and documented, and seek other
options to achieve HUD's intention in this section, suggesting the
possibility of a loan assumption or tolling agreement. Finally, the
commenter asks, where the requirements may result in additional third
party expenses, whether those expenses may be reimbursable through
either the assignment claim or other claim type if it is determined
that the loan is not eligible for a MOE Assignment.
HUD Response: HUD would like to confirm that Mortgagee Letter 2015-
03 does not require a mortgagee to modify the loan documents. However,
as stated in Mortgagee Letter 2015-03, in order to perfect an
assignment claim, a mortgagee must be able to certify that it is, in
fact, assigning a valid, legally enforceable first lien. The mortgagee
must take whatever steps it deems necessary to ensure that its
certification is truthful, which may or may not include modifying the
loan documents, depending on the circumstances and on state law. Once
again, Mortgagee Letter 2015-03 places no restrictions on the source of
funds used to obtain any requisite documentation or to fulfill any
requisite conditions.
Comment: Clarification needed regarding the timing of the HERMIT
system upgrades.
HUD Response: The HERMIT release to accommodate the requirements of
Mortgagee Letter 2015-03 will occur prior to the June 1, 2015, date
indicated in the mortgagee letter.
Comment: Clarification needed regarding whether the HERMIT system
upgrades will include functionality to accept a MOE Assignment of the
case if the last remaining borrower passes away prior to the case
reaching 98% of the Maximum Claim Amount (MCA).
HUD Response: The HERMIT system updates will include functionality
necessary to accept a MOE Assignment of the case if the last remaining
borrower passes away prior to the case reaching 98% of the MCA. Any
assignment under the MOE Assignment must be initiated within 90 days
from the MOE Assignment election or within 180 days of the publication
date of Mortgagee Letter 2015-03, whichever is later.
Comment: Clarification needed regarding whether or not MOE
Assignments can be made when the unpaid principal balance exceeds 100%
of the MCA.
HUD Response: HUD would like to confirm that, as stated in
Mortgagee Letter 2015-03, in order for a HECM to be eligible for a MOE
Assignment, the outstanding loan balance may not exceed the MCA. A HECM
with an outstanding loan balance greater than the MCA may become
eligible, provided that the outstanding loan balance at the time of
assignment does not exceed the MCA and all other conditions and
requirements for a MOE Assignment are met.
Comment: FHA's servicing contractor, NOVAD, should be equipped and
trained to approve requests for assignment quickly when the MOE
Assignment election is utilized, as servicers are only given 90 days to
determine eligibility, gather additional documents, potentially modify
the loan, and assign the claim to HUD.
HUD Response: HUD appreciates the comment. HUD's loan servicing
contractor is receiving the necessary information in order to review
assignment requests pursuant to Mortgagee Letter 2015-03. This review
will include an examination of the applicable timeframes, the
initiation
[[Page 23811]]
process, and all required documentation.
Comment: Clarification needed regarding the calculation of the
current principal limit for the Non-Borrowing Spouse. Commenters ask
whether or not the calculation of the current principal limit for the
Non-Borrowing Spouse should include the calculated growth to the
principal limit and seek clarification as to how mortgagees should
apply funds in cases where a payment may be used to reduce the unpaid
principal balance. Commenters seek examples of such ``pay down''
scenarios and the specific transaction code in HERMIT that should be
used.
HUD Response: As stated in Mortgagee Letter 2015-03, there are two
different tests that are applicable and only one of the tests must be
satisfied in order for a HECM to be eligible for a MOE Assignment. The
two tests are the Factor Test and the Principal Limit Test. The Factor
Test compares what the principal limit factor (PLF) \1\ would have been
at origination had the Eligible Surviving Non-Borrowing Spouse been a
borrower. If the Eligible Surviving Non-Borrowing Spouse's PLF would
have been greater than or equal to the deceased borrower's PLF at
origination, the test is satisfied. The Factor Test does not take into
consideration the growth of the principal limit.
---------------------------------------------------------------------------
\1\ Principal Limit Factor tables are available here: https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm.
---------------------------------------------------------------------------
The Principal Limit Test does take into account the calculated
growth. The growth must be calculated by using what the PLF, in
addition to the initial principal limit, would have been had the
Eligible Surviving Non-Borrowing Spouse been a borrower at origination.
In order to satisfy the Principal Limit Test, the outstanding loan
balance must be equal to or less than what the principal limit would
have been for the Eligible Surviving Non-Borrowing Spouse at the time
the loan became due and payable due to the death of the last surviving
borrower. Mortgagee Letter 2015-03 does not place restrictions or
requirements on the source of funds that may be used to bring the
outstanding loan balance in compliance with the Principal Limit Test.
Additionally, Mortgagee Letter 2015-03 places no restrictions or
requirements on the manner in which an outstanding loan balance may be
brought into compliance with the Principal Limit Test. There will,
however, be no new transaction codes in HERMIT.
Comment: Clarification needed regarding whether or not a mortgagee
may pay down the balance of a HECM loan in order to allow a Non-
Borrowing Spouse to meet the Principal Limit Test. Commenter notes that
under current practice, HUD will not accept a 98% Assignment if the
mortgagee has paid taxes or insurance on behalf of the borrower, and
seeks clarification regarding whether these restrictions will apply
under Mortgagee Letter 2015-03. Commenter asks HUD to confirm whether
or not they will accept MOE Assignments when (1) the mortgagee has
contributed amounts toward the PLF Pay Down; (2) the mortgagee has
contributed amounts to satisfy taxes, insurance, Home Owners
Association fees and condominium assessments due and paid at any time
prior to completing a MOE Assignment; and (3) the mortgagee has
contributed amounts to satisfy attorney fees, court costs, appraisal
fees, inspection fees, etc., incurred by the mortgagee prior to
completing the MOE Assignment.
HUD Response: Mortgagee Letter 2015-03 does not place restrictions
or requirements on the source of funds that may be used to bring the
outstanding loan balance in compliance with the Principal Limit Test.
Additionally, Mortgagee Letter 2015-03 places no restrictions or
requirements on the manner in which an outstanding loan balance may be
brought into compliance with the Principal Limit Test. The mortgagee
letter does, however, require that the outstanding loan balance be less
than the MCA and that either the Factor Test or Principal Limit Test is
satisfied.
Comment: Because all states generally have a statute of limitations
for mortgage foreclosures or collecting or realizing on a mortgage
loan, the use of a document by a mortgagee with a Non-Borrowing Spouse,
such as a tolling agreement, should be a qualifying attribute for the
Non-Borrowing Spouse to make a HECM loan eligible for a MOE Assignment.
HUD Response: In order to perfect a MOE Assignment claim, a
mortgagee must be able to certify that it is, in fact, assigning a
valid, legally enforceable first lien that will remain valid and
legally enforceable throughout the lifetime of the Eligible Surviving
Non-Borrowing Spouse. The mortgagee must take whatever steps it deems
necessary under the laws of the jurisdiction in which the property is
situated to ensure that its certification is truthful, which may
include obtaining a tolling agreement.
Comment: Clarification needed regarding meaning of ``judicially
resolved''. Commenter asks if the judgment must be entered in the
mortgagee's favor, or if a dismissal with prejudice would be
sufficient. Commenter also requests clarity regarding whether HUD is
requiring or expecting that the Non-Borrowing Spouse will sign a
release or waiver for these instances.
HUD Response: HUD appreciates the opportunity to address this
concern. Mortgagee Letter 2015-03 requires a mortgagee to provide
documentation that supports an affirmation that no allegations that
would invalidate the HECM mortgage exist or if there were such
allegations, evidence of their judicial resolution in favor of the
mortgagee. A dismissal with prejudice would suffice for evidence of a
judicial resolution in favor of the mortgagee. A judicially approved
settlement of all claims against the mortgagee would also suffice.
Mortgagee Letter 2015-03 does not require a surviving Non-Borrowing
Spouse to sign a release or a waiver. However, a mortgagee is required
to certify that it is, in fact, assigning a valid, legally enforceable
first lien. The mortgagee must take whatever steps it deems necessary
to ensure that its certification is truthful.
Comment: Clarification needed regarding reinstatement of a MOE
Assignment Deferral Period.
HUD Response: Where an obligation under the terms of the mortgage
has not been met prior to completion of a MOE Assignment, the MOE
Assignment Deferral Period ceases and the HECM is not eligible for a
MOE Assignment unless and until the MOE Assignment Deferral Period is
reinstated. Thus, where a missed obligation is subsequently cured, the
MOE Assignment Deferral Period may be reinstated and the MOE Assignment
process may proceed.
Comment: HUD should provide examples of the required certifications
and other timeframes.
HUD Response: HUD confirms that model language for the required
certifications was provided in the text of Mortgagee Letter 2015-03 and
remains valid for use in connection with a MOE Assignment.
Comment: Clarification needed regarding First Legal Due Date.
(a) Commenter seeks clarification as to whether or not a
mortgagee's reporting requirements of the election to take a MOE
Assignment extend all of the current HECM servicing reporting timelines
that impact claim curtailment, including but not limited to undertaking
and reporting first legal action or ordering a due and payable
appraisal. Commenter also requests that these adjusted timelines be
automatically captured in HERMIT, thus avoiding an auto-curtailment in
HERMIT which
[[Page 23812]]
would further necessitate retrieving the curtailment on a supplemental
claim.
Commenter asks HUD to clarify that that the ``Due Date'' for
purposes of payment of claim means the date when a mortgagee notifies
HUD under Mortgagee Letter 2015-03 that it has determined not to
utilize the MOE Assignment, or, if applicable, that it has elected the
MOE Assignment but then determined that the mortgage is not eligible
for assignment because all established conditions and requirements for
the MOE Assignment are not met, and that this timeline applies to all
curtailable events.
HUD Response: The Due Date for purposes of payment of claim means
the date when a mortgagee notifies HUD that it has determined not to
utilize the MOE Assignment, or, if applicable, that it has elected the
MOE Assignment but then determined that the mortgage is not eligible
for assignment because all established conditions and requirements for
the MOE Assignment are not met. All subsequent required timeframes are
determined in relation to this Due Date. HUD would like to reiterate
mortgagees that any election made pursuant to Mortgagee Letter 2015-03
must be made within the later of 120 days of the issuance of Mortgagee
Letter 2015-03 or 30 days after the servicer receives notice of the
last surviving borrower's death. As such, where a mortgagee does not
elect to utilize the MOE Assignment, and instead elects to proceed in
accordance with the HECM documents, the Due Date may not exceed the
later of 120 days of the issuance of Mortgagee Letter 2015-03 or 30
days after the servicer receives notice of the last surviving
borrower's death, as provided in that mortgagee letter.
(b) Commenter asks HUD to clarify that, following the election of
the MOE Assignment and the assessment and determination that a Non-
Borrowing Spouse is ineligible for a MOE Assignment Deferral Period,
the timeline for First Legal Action is automatically extended, in
addition to any additional time that may be allowed by the Secretary,
beyond this automatically extended time period. Commenter requests that
HUD clarify the manner in which a servicing mortgagee should update
HERMIT with this information to avoid a claim being automatically
curtailed to the date six months from the death of the last surviving
borrower. Commenter also requests that HUD clarify which dates should
be provided for the date the servicing mortgagee notified HUD of the
death (Block 29) and the expiration of the extension (Block 19) in such
cases in order to avoid curtailment.
HUD Response: Under Mortgagee Letter 2015-03, where a mortgagee
elects the MOE Assignment and subsequently determines that either the
HECM or the surviving Non-Borrowing Spouse is not eligible for a MOE
Assignment, the Due Date for claim purposes is considered to be the
date that such a determination was made. All subsequently required
timeframes, including the timeframes regarding First Legal Action, are
determined in relation to the Due Date.
The User Assistance Test (UAT) for the HERMIT changes will occur in
Spring 2015, as the scheduled release date is targeted for April 25,
2015. The process expected to be in effect at that time is as follows:
To change the ``Due Date'' in HERMIT, the User will access the
``Contact Tab'' and un-check the ``Eligible NBS'' box, causing the Due
& Payable without HUD Approval Timeline to be created, with a reason of
``Death''. The loan status will be updated to ``Due & Payable'' and the
date the box is un-checked will become the new ``Due Date''.
(c) Commenter requests clarification regarding the time period for
commencement of First Legal Action for loans which previously had
extensions but are now under the time periods provided in Mortgagee
Letter 2015-03. Commenter notes that there are many cases that have
been on a Non-Borrowing Spouse extension and questions whether First
Legal Action for these loans restarts as of Mortgagee Letter 2015-03.
When must First Legal Action be completed to avoid interest
curtailment?
HUD Response: As provided in Mortgagee Letter 2015-03, all
extensions provided by FHA Info 14-34 have expired. No further
extensions are permissible under FHA Info 14-34. Mortgagees must
proceed in accordance with the timeframes established in Mortgagee
Letter 2015-03.
Comment: Clarification needed regarding whether or not a HECM loan
will be eligible for a MOE Assignment Deferral Period if the Non-
Borrowing Spouse files for bankruptcy protection. Commenter also seeks
clarification as to whether the MOE Assignment eligibility will be
delayed until after the bankruptcy petition or procedure is dismissed
(similar to the requirement to complete First Legal Action in 24 CFR
206.125(d)(2)) or whether a Non-Borrowing Spouse that files for
bankruptcy is ineligible for the MOE Assignment unless the bankruptcy
is dismissed within the stated guidelines.
HUD Response: HUD would like to clarify that the outstanding loan
balance of a HECM is not a debt owed by a non-borrower. Only a borrower
is obligated to satisfy a HECM. Further, a HECM is a non-recourse loan
and as such, no borrower, or borrower's estate, is personally liable
for any amounts that may exceed the proceeds received from the
subsequent sale of the mortgaged property. Further, any amount that may
be required to bring the outstanding loan balance of a HECM in
compliance with the Principal Limit Test, in order to be eligible for a
MOE Assignment, is similarly not a debt owed by a non-borrower. Thus,
any such amount cannot be included as a debt owed by a Non-Borrowing
Spouse filing for bankruptcy. To the extent a mortgagee believes that
the automatic stay provision may apply, the mortgagee may take whatever
steps it deems necessary to ensure that communication with the Non-
Borrowing Spouse would not violate the automatic stay. Regardless, a
mortgagee must make its election within the later of 120 days of the
issuance of Mortgagee Letter 2015-03 or 30 days after the servicer
receives notice of the last surviving borrower's death, whichever is
later. As also stated in Mortgagee Letter 2015-03, any extension to
this timeframe is at the sole discretion of HUD.
Comment: FHA should consider initiation of the assignment to occur
when the loan is uploaded for selection in HERMIT.
HUD Response: HUD considers assignment initiated when a complete
assignment request is uploaded in HERMIT. A complete assignment request
includes all of the required documents identified in Mortgagee Letter
2015-03.
B. Additional Options and Other Comments
Comment: Voluntary nature of the MOE Assignment is problematic.
Commenters note that the MOE Assignment election is left to the
discretion of the mortgagee, and mortgagees are unlikely to select that
option. One commenter specifically notes that the lack of guidance and
clarity, coupled with the fact that lenders must indemnify HUD for any
errors, make lenders unlikely to exercise the MOE Assignment option.
HUD Response: As stated in Mortgagee Letter 2015-03, HUD cannot
interfere with the private contractual rights retained by the
mortgagees. Further, as the mortgagee is the party to the contract of
insurance, it is solely within the discretion of the mortgagee whether
to elect to amend its contract of mortgage insurance under the MOE
Assignment or to proceed in accordance with the loan documents as
endorsed.
[[Page 23813]]
Currently, for any claim for insurance benefits filed by a mortgagee,
mortgagees are subject to unwinding of a filed claim where the
conditions for that claim have not been met. This typical requirement
is extended to the MOE Assignment just as it would be on an ordinary
assignment or claim.
Comment: MOE Assignment is not an adequate alternative to
foreclosure and HUD should provide alternative relief. Commenters state
that by requiring the Non-Borrowing Spouse to meet the Principal Limit
Test in order to qualify for assignment of the loan, HUD is putting
forth an option that the majority of surviving Non-Borrowing Spouses
cannot benefit from. Commenters identify the uncertainty with
calculating the PLF and growth rate, the cost of reducing the principal
balance, and the short deadline by which the Non-Borrowing Spouse must
meet the Principal Limit Test as obstacles.
Commenters urge HUD to provide alternative options to protect Non-
Borrowing Spouses, such as the Hold Election. One commenter suggests
that HUD could satisfy the HECM by paying the lesser of the unpaid
principal balance or 95% of the property's appraised value on behalf of
the deceased borrower and then take a new mortgage interest due upon
the Non-Borrowing Spouse's death. Another commenter recommends that HUD
allow Non-Borrowing Spouses to remain in the home and pay a portion of
the interest accruing on the loan based on their ability to pay; HUD
would accept early assignment of the loan and defer the due and payable
status of the loan so long as the Non-Borrowing Spouse pays a portion
of the interest accruing on the loan and fulfills the obligations under
the mortgage. Commenter also recommends that HUD allow surviving Non-
Borrowing Spouses to pay money to reduce the unpaid principal balance
to meet the requirements of the Principal Limit Test over time, rather
than in one large, lump-sum payment; HUD would accept early assignment
of the loan, defer the due and payable status of the loan and allow the
surviving spouse to pay the necessary amount over a period of years.
HUD Response: As previously stated, HUD cannot interfere in private
mortgage contracts. HUD also has a statutory obligation to ensure the
fiscal soundness of the FHA insurance funds, and as such, cannot ignore
its fiduciary duty to the fund. HUD has provided what it believes
permissible, while recognizing the sanctity of private contractual
relationships and upholding its statutory obligation to ensure the
fiscal soundness of the FHA insurance funds.
Additionally, as stated previously, Mortgagee Letter 2015-03 does
not place restrictions or requirements on the source of funds that may
be used to bring the outstanding loan balance in compliance with the
Principal Limit Test, or the manner in which an outstanding loan
balance may be brought into compliance with the Principal Limit Test.
However, the mortgagee letter does require that the outstanding loan
balance not exceed the MCA and that either the Factor Test or the
Principal Limit Test is satisfied at the time of assignment.
Finally, as noted above, HECM loans are non-recourse and cannot
result in a deficiency judgment against any party. A HECM foreclosure
that may occur as a result of the last surviving borrower's death
should not constitute a reportable event in the credit file of either
the borrower's estate or the surviving Non-Borrowing Spouse.
Comment: Additional procedural protections are needed for Non-
Borrowing Spouses. Commenter asserts that 90 days to obtain good,
marketable title is not enough time and the proof of title that is
required should be reasonable. Commenter urges HUD to make clear that
marketable title is not the same thing as probate, and an opinion
letter from a Title Company or a licensed attorney practicing probate
law in the jurisdiction should suffice to establish ``marketable''
title.
HUD Response: HUD would like to confirm that Mortgagee Letter 2015-
03 does not require a surviving Non-Borrowing Spouse to obtain legal
title to the mortgaged property in order to qualify as an Eligible
Surviving Non-Borrowing Spouse. A surviving Non-Borrowing Spouse must
obtain either legal title to the mortgaged property or some other legal
right to remain within 90 days of the death of the last surviving
borrower. Where a surviving Non-Borrowing Spouse is unable to obtain
legal title, the surviving Non-Borrowing Spouse must be able to
establish some other legal right to remain in the mortgaged property.
Comment: HUD should instruct servicers about how to communicate
with surviving Non-Borrowing Spouses. Commenter notes that servicers
need to improve communications with surviving Non-Borrowing Spouses,
and that HUD should provide explicit instructions to servicers about
how to adequately communicate with surviving Non-Borrowing Spouses.
HUD Response: HUD does not instruct servicers how to communicate.
HUD would expect servicers to communicate with the representatives of
deceased borrowers. HUD further expects that servicers would comply
with all Federal and state laws and requirements regarding mortgage
servicing, including those of the Consumer Financial Protection Bureau.
Comment: Data has not been provided to support HUD's assertion that
providing the Hold Election to all surviving Non-Borrowing Spouses
would be too costly. Commenters assert that HUD should provide all
data, assumptions, calculations, conclusions and alternatives explored
that relate to the cost of providing the Hold Election to all surviving
Non-Borrowing Spouses.
HUD Response: HUD's risk analysis indicates that the Hold Election,
if broadly applied to all pre-August 4, 2014, HECMs where a Non-
Borrowing Spouse remains in residence after the borrower's death, would
produce much more substantial losses for the insurance funds than would
likely be generated by the extension of the MOE Assignment to all such
HECMs. Using data from the 2010 Survey of Consumer Finances, HUD
estimated that about 20% of HECM borrowers are married to non-borrowing
spouses.\2\ On the basis of the correct data regarding HECM borrowers
with non-borrowing spouses, along with data from the Centers for
Disease Control to estimate life expectancies of the borrowing and non-
borrowing spouses, and assuming no further cash draws after the
borrowing spouse exits the home and other reasonable assumptions, HUD
estimated the potential cost of the Hold Election to the insurance
funds to be $1.769 billion if it were made broadly available to all
surviving, non-borrowing spouses and accepted by them. Using the same
assumptions, consistently applied, HUD estimated the potential cost of
the MOE Assignment to the funds to be $439 million if it were made
broadly available to all surviving, non-borrowing spouses and accepted
by them. While both figures are estimates, HUD is highly confident of
the order of magnitude of the difference between the two figures.
---------------------------------------------------------------------------
\2\ The February 2015 Determination on Remand submitted to the
District Court in the Plunkett case incorrectly stated this as ``20%
of the married seniors in the HECM program'' being married to non-
borrowing spouses; however, this was a drafting error which played
no part in HUD's actual cost calculation. That calculation was based
on the assumption that 20% of all borrowers in the HECM program had
non-borrowing spouses.
---------------------------------------------------------------------------
Comment: Provide notice and information to HECM borrowers and their
spouses regarding the risk of displacement and their rights under the
HECM statute.
[[Page 23814]]
HUD Response: HUD appreciates the opportunity to address this
concern. All mortgagee letters, including Mortgagee Letters 2015-03,
2015-02, and 2014-07, are public documents and are available to the
public on HUD's Web site. HUD also published notices soliciting public
comment on MLs 2015-03 and 2014-07 in the Federal Register, which
provided additional notice of HUD's HECM policy changes related to Non-
Borrowing Spouses. Finally, HUD notes that prospective HECM borrowers
must receive housing counseling to be eligible for a HECM, and would
like to remind current HECM borrowers and their spouses that they may
speak with housing counselors at any time.
Dated: April 24, 2015.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2015-10019 Filed 4-28-15; 8:45 am]
BILLING CODE 4210-67-P
