Potential application in Los Angeles
The action applies to the Home Equity Reverse Mortgage Information Technology (HERMIT) program, which was launched in 2012 to improve HECM approval processes and the servicing and processing of claims at HUD. Following the impact of the wildfires in Los Angeles, RMD also reached out to HUD.
“These protections we implemented in 2023 still apply to all HECM borrowers,” a HUD spokeswoman told RMD this week.
To explore a potential bid to bring back mortgage borrowers who were also victims of the Los Angeles wildfires, RMD spoke with Jared Skrabala at Reverse Market Insight (RMI), engaged in providing oversight and asset management.
“HUD has taken additional steps to ensure that the system warning/flag for properties located in presidentially declared major disaster areas (PDMDA) is highly visible in the HERMIT system to ensure that that warning is taken into account before any credit decision is made, including decisions about claims to be paid and transfers of property confiscation,” said Skrabala.
The measure was implemented in HERMIT in September 2023, and HERMIT Release Notes 7.4 “included an enhancement to add ‘loan header scrolling text’ to display an active warning that will always appear (in red) at the top of the page when updating. loan from the program,” he explained. “The warning is an effective way to bring attention to the area available to PDMDA.”
This applies to all HECM borrowers who can live in PDMDA, he said. President Joe Biden issued a disaster declaration for the affected areas in Los Angeles on Jan. 8. But there may be more discussion from recovery workers about actions that could impact wildfire victims, Skrabala said.
“From a service point of view, my expectation is that HECM officials take additional measures to protect borrowers who have to evacuate after a natural disaster and prevent unnecessary acceleration of debt,” he said. “I think there will be more awareness and sensitivity here. I think the staff is looking at these cases very closely and will want to review everything before submitting a claim that should be paid.”
Borrowers have crisis options
In addition to the HERMIT protection, FHA earlier this week published a notice designed to provide guidance to lenders regarding the servicing and origination of FHA-sponsored loans to PDMDAs, including HECMs.
“For PDMDAs, FHA provides HECM mortgage lenders with an automatic extension of 90 days from the PDMDA’s foreclosure expiration date to initiate or resume foreclosure action,” the notice said.
HECM loans due and payable for any reason other than “the death of the last surviving borrower and eligible non-borrower spouse are subject to a 90-day extension of the HECM foreclosure time period,” the agency explained.
Industry experts including Skrabala and Gail Balettie, senior vice president of customer satisfaction Celinkpreviously provided several action items for HECM borrowers to refer to when affected by fires.
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