HUD Releases Update to HECM Program Requirements for HECMs Due and Payable Due to Death of Borrower

On August 31, 2022, the U.S. Department of Housing and Urban Development (HUD) released Mortgagee Letter 2022-15 titled “Update to Home Equity Conversion Mortgage (HECM) Program Requirements for Notice of Due and Payable Status.”

Mortgagee Letter 2022-15 modifies a HECM mortgagee’s notification requirements to a borrower’s estate after a loan becomes due and payable due to the death of the last surviving borrower. The Mortgagee Letter requires that mortgagees must provide notice to a HECM borrower’s estate or heirs that the HECM has become due and payable within 30 days of providing notice of the borrower’s death to HUD, regardless of case number assignment date.  HUD’s prior guidance for case numbers assigned prior to September 19, 2017, was set forth in Mortgagee Letter 2015-10, which required that servicers provide notice to the estate or heirs of the deceased borrower that the HECM has become due and payable within 30 days of the death of a HECM borrower. HUD’s 2017 Final HECM Rule adopted the more lenient standard of calculating a mortgagee’s deadline starting with the date of notification to HUD, and through 2022-15, HUD has modified the requirements in Mortgagee Letter 2015-10 to align the notice policy for all HECMs regardless of case number assignment date or due and payable date. 

Mortgagees may immediately seek reimbursement for any amounts automatically curtailed by HUD on newly filed claims for FHA insurance benefits until such time as HERMIT is updated to reflect this policy change. However, mortgagees may only seek reimbursement of previously curtailed debenture interest through a supplemental claim where the death of the last surviving borrower occurred on or after August 31, 2022.