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HECM Assignment and HOAs – Are you Doing It Right?

News - Precedent Management

Home Equity Conversion Mortgages (HECM) have recently become a very popular product with Americans as they enter their senior years and utilize the equity in their homes to lighten the burden on their financial situation and increase the quality of their lives. The large numbers of HECM loans serviced has led to increased regulatory oversight and policies, and increased responsibility for servicers.

A little noted passage on page 4 of the HUD Mortgagee Letter 2017-05 is beginning to get the attention of HECM servicers nationwide. Mortgage Letter 2017-05 is focused on HECM Claim Type 22 (CT-22) Assignment Requests, and among other things requires HECM servicers to provide contact information for HOA/Condo Associations and proof that all fees are current for assignment requests to HUD to be processed. What does all of this mean and how can servicers take advantage?

HUD’s ruling

HUD has recently communicated with servicing groups that this rule would be enforced, regardless of super lien or non-super lien status of the state where the HECM is located. What this means for servicers and investors is that HUD will not accept assignment claims with outstanding HOA/Condo dues or delinquency. The responsibility for identification, contact, review of outstanding balance, and payment of legitimate fees is now the obligation of the servicer.

Evidence of Payment and Current Status

HUD has also placed the obligation of providing proof of payment of all past due obligations to HOA/Condos Associations on the shoulders of the servicer. As there is no single document provided on a nationwide basis that will work, the type of document that HUD will accept is vague, but will vary from state to state. States have developed their own procedures and documents for dealing with these issues, as there has never been a nationwide standard or terminology that was followed. Estoppels are used in Florida while other states utilize payoff letters, ledgers, demand letters, etc. This confusion between states can cause issues for any organization, as the servicer cannot be certain what documents they are getting from the HOA/Condo management.

Further, the legal responsibilities and exposure placed on HECM servicers are expanding as the industry comes to grips with the various aspects of these loans. Servicers that are not keeping abreast of recent regulatory changes may find themselves facing increased costs and risks in their portfolios. The good news is Precedent is ready to assist HECM servicers in mitigating the risk posed by HOA/Condo past due accounts and the liabilities that today’s HECM servicers face in managing their assignment process.

Precedent offers HOA/Condo management solutions

Precedent performs HOA/Condo identification, contact, ledger and fee reviews and negotiation, payoff and ongoing tracking for HECM servicers on a nationwide basis. We are familiar with all state specific laws (and track their changes), policies, procedures, and paper work issues, and have successfully resolved 10’s of thousands of accounts for our clients.

 

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