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Protections for reverse mortgage borrowers

If the COVID-19 pandemic has made it harder for you to meet your reverse mortgage loan responsibilities, you're not alone. Fortunately, there are options and resources available to you.

The responsibilities for Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgages, include occupying your home as your primary residence, paying your property taxes or homeowners’ insurance on-time, and keeping your home in good condition.

Usually, if you are unable to meet these loan obligations your lender or loan servicer will notify you that your loan is “due and payable,” meaning it may be in default and foreclosed upon. The lender or loan servicer may also call a reverse mortgage loan due and payable when the reverse mortgage borrower dies.

If you are a reverse mortgage borrower affected directly or indirectly by COVID-19, the CARES Act and guidance from the US Department of Housing and Urban Development (HUD) can protect you from default and foreclosure if you have an HECM reverse mortgage.

Here’s what you need to know:

As a borrower, you may ask your lender for an extension

Ask your loan servicer to delay calling your loan due and payable. You must ask for an initial extension no later than June 30, 2021. Upon your initial request, your lender or loan servicer must delay calling your loan due and payable for up to six months. If needed, an additional extension period not to exceed six months may be approved by HUD. You do not need to provide any documentation to your lender or loan servicer to receive an extension. During the extension period, your lender or loan servicer cannot charge any late fees and penalties. Interest will continue to accrue.

If you asked for an initial extension on or before June 30, 2020, you may ask your lender or loan servicer for two additional three-month extensions. Your lender or loan servicer must approve your request, but you must ask for each three-month extension individually and neither three-month extension may extend past December 31, 2021.

As an eligible non-borrowing spouse or heir, you may ask for an extension

The eligible non-borrowing spouse or heirs may ask the lender or loan servicer to extend timelines when a reverse mortgage borrower dies. This request must be made no later than June 30, 2021. Timelines that the lender or loan service may extend include, for example, when the eligible non-borrowing spouse must prove their legal right to remain in the home and when the heirs pay-off the loan or sell the property. The extension can be for up to six months. If needed, an additional extension period not to exceed six months may be approved by HUD.

If the non-borrowing spouse or heir asked for the initial extension on or before June 30, 2020, the non-borrowing spouse or heir may ask the lender or loan servicer for two additional three-month extensions. The lender or loan servicer must approve the request, but the non-borrowing spouse or heir must ask for each three-month extension individually and neither three-month extension may extend past December 31, 2021.

Your lender cannot foreclose upon your home until after June 30, 2021

Due to COVID-19, HUD told lenders and loan servicers that they may not foreclose on any properties with a HECM reverse mortgage (other than vacant or abandoned properties) until after the designated date. To learn more, go to https://www.hud.gov/answers . Click on the COVID-19 tab on the left-hand side and select “LSC HECM Servicing.”