U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

January 3, 2011
MORTGAGEE LETTER 2011-01
TO:

ALL HUD-APPROVED MORTGAGEES
ALL HUD-APPROVED HOUSING COUNSELING AGENCIES

SUBJECT: Home Equity Conversion Mortgage Property Charge Loss Mitigation
This Mortgagee Letter provides loss mitigation guidance for the resolution of Home Equity
Conversion Mortgages (HECM) that are delinquent due to unpaid property charges and mortgages
wherein due and payable requests were previously deferred by HUD.1 The guidance in this
Mortgagee Letter applies to all HECMs where the mortgagor is delinquent in paying property
charges or the mortgagee has advanced corporate funds to satisfy an unpaid property charge on
behalf of the mortgagor, or both.
Background
The HUD regulations contain specific requirements governing the payment of property
charges by the mortgagor and the actions mortgagees may take when payments are not made by the
mortgagor. Regulations at 24 CFR § 206.27(b)(2) states, in part, that “[t]he mortgagor shall
maintain hazard insurance on the property in an amount acceptable to the Secretary and the
mortgagee.” In addition, § 206.27(b)(6) states that “[t]he mortgagor must pay taxes, hazard
insurance premiums, ground rents and assessments in a timely manner, except to the extent such
property charges are paid by the mortgagee in accordance with § 206.205.” Section 206.205(c)
states, in part, that, “[i]f a pattern of missed payments occurs, the mortgagee may establish
procedures to pay the property charges from the mortgagor’s funds as if the mortgagor elected to
have the mortgagee pay the property charges under this section.” Section 206.205(c) also provides
that the mortgagee may make payments on behalf of the mortgagor from the mortgagor’s available
funds (i.e., mortgagor’s remaining principal limit). However, once the mortgagor’s available funds
are exhausted, the mortgagee must advance its own corporate funds to protect HUD’s interest in the
property, and the mortgagee should then seek reimbursement from the mortgagor.
When the mortgagor fails to pay a property charge as required by the provisions of the
mortgage, the mortgage is deemed to be out of compliance with FHA requirements and FHA
considers the mortgage to be delinquent. Mortgagees, however, must begin working with the
mortgagor to bring the mortgage back into compliance at the earliest possible point. It is only after
all applicable loss mitigation strategies have been exhausted that the mortgagee may submit a due
and payable request to HUD. While it is HUD’s goal to avoid foreclosures as a result of unpaid
property charges, mortgagors must comply with the terms of their mortgage, and mortgagees must
comply with FHA requirements including the regulations as clarified in pertinent policy issuances.
1

During June 2007 through April 2009, HUD received and approved requests from lenders to defer foreclosing on mortgages when
the mortgagor failed to pay taxes and hazard insurance premiums as required by the mortgage. Requests to defer foreclosure were not
requests for the Secretary to approve due and payable requests as found in 24 CFR 206.125.
www.hud.gov

espanol.hud.gov

 2

Reporting Delinquencies to HUD
HUD’s regulations at § 206.27(b)(2) and (b)(6) respectively require the mortgagor to
maintain hazard insurance on the mortgaged property, and pay all pertinent property charges in a
timely manner. When mortgagors fail to comply with the provisions of their mortgage and the
mortgagee receives notification of the delinquency, paragraph 1-11 of HUD Handbook 4060.1
REV-2 requires mortgagees to report such delinquencies to HUD when requested.
HUD is updating the HECM Insurance Accounting Collection System (IACS) to allow for
the collection and monitoring of delinquent loans. As of the date of this Mortgagee Letter,
mortgagees shall report to HUD all loans in their respective portfolios that are delinquent, including
any loan where the mortgagor is on a repayment plan or in a deferred status. To complete the initial
reporting, mortgagees shall submit a Microsoft Excel file via email to: HECMAdmin@hud.gov by
February 7, 2011. Mortgagees must follow the formatting instructions attached to this Mortgagee
Letter for reporting delinquencies to HUD. Mortgagees should not construe reporting a delinquency
to HUD to be the equivalent of requesting permission and approval from HUD to call a mortgage
due and payable.
Mortgagees shall report future delinquencies involving property charges either by
submitting a monthly Excel file to HUD five (5) calendar days prior to the end of the current month
that delinquencies occur, or by manually updating IACS as delinquencies occur. Reports must
include corporate advances for unpaid property charges and amounts repaid by the mortgagor.
Loss Mitigation Option
When a mortgagee receives notice of a mortgagor’s failure to pay property charges, the
FHA considers the mortgage to be delinquent. Thus, the mortgage may not be assigned to HUD
pursuant to the assignment option (See 24 CFR 206.107(a)(1)). Within thirty (30) days of the first
missed property charge payment, the mortgagee must inform the mortgagor that an obligation of the
mortgage has not been performed, and the mortgage is not in compliance with the FHA
requirements. The mortgagee must also offer loss mitigation options to allow the mortgagor the
opportunity to bring the mortgage into compliance.
Loss mitigation options available to mortgagors who have a delinquent mortgage due to
unpaid property charges must include, but are not limited to:
(1)
(2)
(3)

Establishing a realistic repayment plan for the delinquent property charge(s);
Contacting a HUD-approved Housing Counseling Agency (HCA) to receive free
assistance in finding some viable resolution to their delinquency, or identifying local
resources available to provide funds or homestead exemptions; and
Refinancing the delinquent HECM to a new HECM if there is sufficient equity to
satisfy the existing mortgage and outstanding property charges.

 3
Repayment Schedule
Mortgagees should use the table below to establish repayment due dates for payment plans.
Mortgagors may repay corporate advances in full prior to the established repayment due date.
Mortgagees may also use a repayment plan in conjunction with other loss mitigation options,
especially when the sum of the corporate advances is in excess of $5,000. If the mortgagor provides
evidence to the mortgagee that they are unable to repay the arrearage within the allotted timeframe
below, mortgagees may, at their discretion, extend the repayment term up to twenty-four (24)
months regardless of the amount of the corporate advance. In no case, may any repayment plan
extend past twenty-four (24) months.
Mortgagees are not permitted to charge a fee or interest for repayment plans.
Corporate Amount Advanced
$1 - $500
$501 - $1,000
$1,001 - $5,000
$5,001 or more

Repayment Schedule
up to 3 months
up to 6 months
up to 12 months
up to 24 months

Issuance of Property Charge Delinquency Letter
For HECM loans that are delinquent due to unpaid property charges, including any loans in
which due and payable requests were previously deferred, mortgagees shall provide a Property
Charge Delinquency Letter (Letter) to mortgagors. The Letter must:
(1)
(2)
(3)

provide a thirty (30) day period in which the mortgagor must respond and arrange to
cure the delinquency;
encourage mortgagors to seek the assistance of an HCA; and
provide a list of all loss mitigation options available to mortgagors to cure the
delinquency.

When referring mortgagors to an HCA, the mortgagee must also provide:
(1)
(2)

the contact information for person(s) at the mortgagee’s office who the counselor may
contact directly to make inquiries or discuss the mortgagor’s loan and financial
circumstances; and
the length of time the counselor has to identify a viable solution that may assist the
borrower with curing the delinquency, or any alternative steps to address the unpaid
property charges.

In order to prevent overburdening mortgagees and HCAs, HUD will allow a staggered
approach to the mailing of Letters. Mortgagees shall have until April 29, 2011, to send all Letters to
mortgagors with loans that are delinquent as of the date of this Mortgagee Letter. Thereafter,
Letters must be sent as soon as the mortgagee receives notice of a missed payment for property
charges.

 4
Attached to this Mortgagee Letter is a model Letter that may be used by mortgagees.
Mortgagees may vary the actual structure of the letter, but should include the substantive
information included in the attached model Letter.
Mortgagees are not required to send a Letter to mortgagors who are currently on a
repayment plan, and in compliance with the terms and conditions of their respective repayment
plan. For existing repayment plans where the mortgagor has failed to comply with the terms of the
repayment plan, the mortgagee should make an effort to renegotiate the plan’s provisions prior to
mailing a Letter to the mortgagor.
Requesting Due and Payable
HUD regulations at 24 CFR § 206.125(a) require mortgagees to notify HUD whenever the
mortgagee determines the mortgage is due and payable as the result of the mortgagor’s failure to
perform an obligation of the mortgage, i.e., non-payment of property charges. Mortgagees shall
submit due and payable requests to HUD’s National Servicing Center if a mortgagor is unwilling to
reimburse the mortgagee for property charges advanced on their behalf, or when all applicable loss
mitigation options have been exhausted, and the mortgagor is unable to cure the delinquency. Due
and payable requests may be submitted by email to HECMServicing@clstulsa.org, or mailed to:
U.S. Department of Housing and Urban Development
National Servicing Center - C&L Service Corporation
2488 East 81st Street, Suite 700
Tulsa, OK 74137
Toll Free: (877) 622-8525
Local: (918) 935-2900
Fax: (918) 935-2994
Mortgagees must include documentation of their efforts to resolve the delinquency as part of
their due and payable request. Mortgagees are required to provide specific documentation that
supports multiple and earnest attempts to contact the mortgagor in order to cure the delinquency.
HUD shall require mortgagees to continue loss mitigation efforts when the documentation
provided by the mortgagee does not demonstrate an earnest attempt to collaborate with the
mortgagor to cure the delinquency.
Mortgagees should inform the mortgagor that they have thirty (30) days to respond to the
due and payable notice. As a reminder, informing the borrower of HUD’s approval of a due and
payable request starts the timeline for when mortgagees must initiate first legal action to foreclose.
All due and payable notification letters sent to mortgagors must provide all available options to cure
the delinquency and avoid foreclosure. The notification should also remind the mortgagor that if
either a refinance of the current HECM, or repayment plan are not viable options, the mortgagor
may choose to sell the property or execute a deed in lieu of foreclosure. Mortgagees should review
HUD Handbook 4330.1, paragraph 13-33 for model language that may be included in the
mortgagee’s due and payable notice. HUD also encourages mortgagees to refer mortgagors to an
HCA. Where the mortgagor fails to correct the delinquency and does not proceed to sell the
property or execute a deed in lieu of foreclosure, the mortgagee must initiate foreclosure as required
under 24 CFR § 206.125(d).

 5

Curing the Delinquency
When the mortgagor becomes current on all property charges and repays all corporate
advances made by the mortgagee to cover property charges, the mortgagor will then be considered
in compliance with the terms of the mortgage and if all other FHA requirements have been satisfied,
the mortgagee may then request to assign the mortgage to the Department pursuant to 24 CFR
§ 206.107. Mortgagees shall follow existing procedures for submitting assignment requests,
including documentation confirming the mortgage is in compliance with all FHA requirements.
In cases involving HECMs that are not in compliance with FHA requirements for reasons
other than failure to pay property charges ( i.e. property does not serve as the mortgagor’s principal
residence, repairs are not completed, etc.) the mortgagee must follow current HUD requirements,
and the mortgage may not be assigned to HUD pursuant to § 206.107.
As future delinquencies occur, mortgagees must comply with existing policy guidance and
applicable timeframes as found in HUD’s regulations, handbooks, mortgagee letters, and any
subsequent policy guidance. Consistent with the purposes and intentions of the HECM program,
mortgagees are encouraged to make every effort to assist mortgagors in correcting delinquencies
and retaining their homes. Foreclosure is and must remain a method of last resort for the resolution
of unpaid property charges. Mortgagees should be proactive and pursue early intervention to avoid
future delinquencies.
If you should have any questions concerning this Mortgagee Letter, please call the FHA
Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech
impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD
(1-877-833-2483).
Sincerely,
/s/
________________________________________
David H. Stevens
Assistant Secretary for HousingFederal Housing Commissioner
Attachments:
HECM Delinquent Loan Data Reporting Procedures
Model Property Charge Delinquency Letter
Paperwork Reduction Act: The information collection requirements contained in this document have been approved
by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520)
and assigned OMB control number 2502-0429. In accordance with the Paperwork Reduction Act, HUD may not
conduct or sponsor, and a person is not required to respond to a collection of information unless the collection displays a
currently valid OMB Control Number.