Understanding Your HECM Relief Options
Although many homeowners over 62 opt for a Home Equity Conversion Mortgage (HECM) to eliminate their monthly mortgage payments, they may still face financial struggles. Unexpected events, such as the COVID-19 pandemic and its impact, can derail even the best plans.
Fortunately, relief legislation and guidance from the Federal Housing Authority (FHA) and the Department of Housing and Urban Development (HUD) provide added protections for borrowers during these challenging times. However, some of these opportunities may be expiring soon, so it’s best to act quickly if you believe they could be helpful to you.
Among the requirements for a HECM, often called a reverse mortgage, are maintenance of the home, continuous insurance coverage, payment of property taxes, and the property’s status as your primary residence. Failure to meet these requirements can result in the loan becoming due and payable.
However, if an impending or recent status change occurred due to COVID-19, there is an opportunity to continue the reverse mortgage. Currently, HECM services must grant an initial 6-month delay to any demand for payment. This additional time can allow you to return to compliance with the terms of the HECM.
Eligibility to Request
Notably, this relief is not limited to a struggling borrower. If the owner of a HECM property has passed away, a non-borrowing spouse or their heirs may also make the extension request. But a critical deadline for an extension request is approaching, so act quickly.
An initial extension request must be made before September 30, 2021. If an initial extension request was made before June 30, 2020, two additional, three-month extensions are offered, but they must be done separately and cannot extend beyond the end of the year. No extension can currently extend beyond June 30, 2022.
Speak with your Servicer
If you’re concerned about a status change triggering the end of your reverse mortgage, the best approach is to reach out to the loan’s servicer. They will be able to discuss all of your current COVID-19 relief options, as well as any other foreclosure avoidance programs that they may offer.
You should also make sure your spouse and heirs are aware of the reverse mortgage and have the appropriate contact information in your absence. Again, a proactive approach to the loan is the only way to ensure it accomplishes the goals that led you to choose it in the first place.
Forward or reverse, Open mortgage has experts that can explain your loan options front to back. Browse our website for additional resources, or call today to speak with a representative.
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment