Reverse mortgage foreclosure protection could help LA borrowers
Potential application to Los Angeles
The action applied to the Home Equity Reverse Mortgage Information Technology (HERMIT) system, originally launched in 2012 to improve HECM approval processes along with service delivery and claims processing at HUD. Following the impact of the Los Angeles wildfires, RMD contacted HUD again.
“These safeguards we implemented in 2023 remain in effect for all HECM borrowers,” a HUD spokesperson told RMD this week.
To assess the potential application to reverse mortgage borrowers who are also victims of the Los Angeles wildfires, RMD spoke with Jared Skrabala at Reverse market insight (RMI), which provides supervision and asset management.
“HUD has taken additional steps to ensure that a system warning/flag for properties located in Presidentially Declared Major Disaster Areas (PDMDA) is prominently visible in the HERMIT system to ensure that that warning is considered before a decision is made taken over the loan. including decisions on due and payable requests and referrals for execution,” Skrabala said.
The measure was implemented in HERMIT in September 2023 and HERMIT Release Notes 7.4 “included an improvement to add a ‘loan header’ to display an active critical alert that is always displayed (in red) at the top of the page when assessing a loan in the system,” he explained. “The warning is an effective way to draw attention to a property located in a PDMDA.”
This applies to all HECM borrowers who may live in a PDMDA, he said. President Joe Biden issued a disaster declaration for the affected areas of Los Angeles on January 8. But there is already likely to be more consultation by mortgage lenders on actions that could impact wildfire victims in the area, Skrabala added.
“From a servicing perspective, I expect HECM servicers will take additional steps to protect borrowers who must vacate their properties after a natural disaster and to prevent unnecessary loan acceleration,” he said. “I think there will be greater awareness and sensitivity here. I can imagine that service providers are keeping a close eye on these matters and want to review everything thoroughly before submitting a request for payment.”
Borrowers have disaster options
In addition to the HERMIT protection measure, FHA earlier this week published a notice intended to provide lenders with guidance on servicing and originating FHA-backed loans in PDMDAs, including HECMs.
“In PDMDAs, FHA is offering HECM mortgage holders an automatic 90-day extension from the date of the PDMDA foreclosure moratorium expiration to initiate or resume a foreclosure action,” the notice said.
HECM loans that become due for a reason other than “the death of the last surviving borrower and eligible non-borrowing spouse are subject to a 90-day extension of the HECM foreclosure periods,” the agency explained.
Industry professionals, including Skrabala and Gail Balettie, senior vice president of customer satisfaction at Celinkpreviously offered several action items that HECM borrowers can refer to if they are affected by the fires.
