The Federal Housing Administration announced Thursday a new assistance option for older adults who have fallen behind on property charges on reverse mortgages due to the impact of the COVID-19 pandemic.
“For senior homeowners, recovering from the financial effects of the pandemic may be especially challenging,” Federal Housing Commissioner Julia Gordon stated.
As the McKnight’s Business Daily previously reported, some older adults are using reverse mortgages to finance their moves to senior living communities. The most common form of reverse mortgage, according to experts, is the FHA-insured home equity conversion mortgage, or HCEM, the only one insured by the federal government. As of July, according to the National Reverse Mortgage Lenders Association, more than 1.21 million households have used an FHA-insured reverse mortgage.
Older adults pay no income on the money they borrow from their home’s equity, certified financial planner Joel Johnson noted in a column for Forbes. That income can be used for monthly cash flow to support healthcare and living needs.
The new COVID-19 FHA-insured HCEM property charge repayment plan allows servicers to offer homeowners up to five years to repay past-due property charges, such as taxes and homeowners insurance, that the servicer advances on the homeowner’s behalf when the homeowner is unable to make those payments.
With the new COVID-19 HECM property charge repayment plan:
- Borrowers may receive a repayment plan regardless of the dollar amount of property charge payments owed;
- Borrowers can benefit from the use of jurisdictional Homeowner Assistance Funds;
- Servicers can offer homeowners a repayment plan of up to five full years (60 months) regardless of any prior repayment plan usage;
- Servicers can offer the COVID-19 HECM Property Charge Repayment Plan for up to one year after the end of the COVID-19 national emergency.
