Using reverse mortgages, adults 62 and older may draw upon home equity to support their needs and remain in their homes.
Many older adults with reverse mortgages have a Home Equity Conversion Mortgage (HECM). The Federal Housing Administration insures HECMs, and the U.S. Department of Housing and Urban Development (HUD) oversees them.
While borrowers do not have to make traditional monthly mortgage payments, they are responsible for certain expenses related to homeownership. These costs include property charges such as taxes, homeowners insurance, and homeowners association fees. Seniors who have an HECM pay an annual insurance premium of 0.5 percent of the mortgage balance.
Lender Advances
If a borrower needs to catch up on payments, the lender advances money to cover property charges. However, the borrower must enter a payment plan to repay the advance. Those who fail to repay their lenders risk losing their homes.
Pandemic-Related Challenges
The COVID-19 pandemic has made it difficult for many older adults with HECMs to afford property charges and fulfill repayment plans. Many also lost loved ones who provided financial assistance support.
In addition, making ends meet amid rising inflation has become particularly challenging for those on fixed incomes.
COVID-19 HECM Repayment Plan
Recognizing these hardships, HUD created the COVID-19 HECM Repayment Plan. This new repayment option aids older adults with HECMs facing financial difficulties due to the pandemic and helping them avoid foreclosure.
Who Can Enroll in This Repayment Plan?
The plan is open to older adults with HECMs who have experienced financial complications because of the pandemic.
Older adults can qualify if:
- they have yet to be successful on an earlier repayment plan;
- they have an arrearage greater than $5,000; or
- they satisfy both of these criteria.
HUD also considers those who are currently enrolled in standard repayment plans.
In order to access the plan, borrowers must inform the loan servicing company that the pandemic has adversely impacted them. This requirement is relatively manageable, as they do not have to provide supporting documentation.
Borrowers can obtain these plans within one year following the expiration of the declared COVID-19 National Emergency. The property charge default does not have to have happened during of the official National Emergency duration. It could have occurred outside of this period as long as it was related to the pandemic.
Plan Duration
The plan is available for a five-year period. This is the case even if a borrower has already enrolled in a standard HECM repayment plan. The five-year period gives borrowers more time to supply payments.
Homeowner Assistance Funds
State Homeowner Assistance Funds (HAF) can provide additional relief to borrowers. Borrowers may obtain a repayment plan covering less than the full amount of arrears. They can then use the HAF funds to satisfy the outstanding amount of delinquent property expenses. The majority of state HAF programs permit applications to repay HECM-related property expenses.
Speak With an Attorney
Seniors interested in learning more about the COVID-19 HECM Repayment Plans should consider consulting with an elder law attorney. An attorney can support borrowers in:
- understanding and accessing a repayment plan,
- helping older adults navigate financial challenges associated with reverse mortgages, and
- avoiding foreclosure.
Find a qualified attorney near you today.
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