CHAPTER 8. ASSIGNMENTS
8-1 PURPOSE. This chapter explains the procedures for the lender to
follow in assigning a mortgage to HUD. Procedures for processing
demand assignments by the local HUD Office are also included. Refer
to HUD Handbook 4330.1 for standard assignment procedures. This
chapter supersedes that handbook only as noted below.
8-2 ASSIGNMENT INSURANCE OPTION. If the lender has chosen the assignment
insurance option at closing,
A.The mortgage may be assigned to HUD if:
1)The outstanding balance, including all payments made to or
on behalf of the borrower, MIP and accrued interest, is
equal to or greater than 98% of the maximum claim amount as
reflected on Form HUD 59100, Mortgage Insurance Certificate,
or
2)The borrower has requested a payment, either from a line of
credit or from a change in the payment plan, which, when
added to the outstanding balance, would equal or exceed 98%
of the maximum claim amount.
B.If the lender chooses to assign the mortgage to HUD, the
following conditions must be met:
1)The lender must be current in making the required payments
to the borrower, and
2)The lender must be current in making payments of MIP
(including interest and late charges if any) and must
continue making monthly payments until the assignment is
recorded, and
3) The mortgage cannot be due and payable due to:
a.The death of the borrower (with no surviving borrower
maintaining the property as a principal residence), or
b.The borrower has sold the property (conveyed title) and
no other borrower retains title in fee simple, under a
lease for not less than 99 years which is renewable or
under a lease having a remaining term of 50 years
beyond the 100th birthday of the youngest borrower.
4)The lender has not notified the local HUD Office of any
event that might cause the mortgage to be due and payable.
See HUD Handbook 4330.1.
5)The lender's request to declare the mortgage due and payable
has not been denied by the local HUD Office.
C.When the lender notifies HUD of its intention to assign the
mortgage, it must provide the borrower with a notice informing
the borrower that the mortgage will be assigned to HUD and,
1)Provide to the borrower an anticipated date of assignment
and instruct the borrower to make any request for
unscheduled or line of credit payments after that date to
HUD;
2)State that HUD will continue to withhold an amount from the
payments to the borrower in order to pay for taxes, if the
lender had been making these payments;
3)State that HUD will not withhold for payments for hazard
insurance and that the borrower must maintain the insurance.
The lender must disburse to the borrower any funds withheld,
but not spent on hazard insurance.
8-3NOTICE TO LOCAL HUD OFFICE OF INTENT TO ASSIGN. The lender must
notify the local HUD Office having jurisdiction over the property when
the lender is preparing to assign the property to HUD and file a claim
for insurance benefits. The local HUD Office must be notified at
least 30 days, but not more than 60 days, prior to the anticipated
date of recording the assignment to HUD. When the lender notifies HUD
of its intent to assign the mortgage, it must submit:
A.The borrower's name, address, and FHA case number;
B.The borrower's checking or savings account number, name of
financial institution, and any other necessary EFT information,
if applicable;
C.The borrower's current payment plan, including the payment plan
change that may have caused the assignment and any unscheduled
payment to be made by HUD within five days;
D.The required withholding for taxes, if applicable, type and
amount of any funds set aside, and any other responsibilities
previously performed by the lender;
E.A copy of the notice to the borrower concerning the assignment of
the mortgage to HUD and including the anticipated date of
recording the assignment;
F.A payment history for the mortgage which shows all payments made
by the lender throughout the loan. This information will be used
to support the lender's claim for insurance benefits;
G.Evidence of the lender's most recent determination that the
property is the principal residence of at least one borrower;
H.The title package on the property for the local HUD Office to
review.
8-4PAYMENTS BEFORE MORTGAGE IS VOLUNTARILY ASSIGNED. The borrower may
request a line of credit or unscheduled payment after the lender has
notified HUD of its intent to assign the mortgage.
A.If the borrower requests a line of credit payment, the lender may
make the payment before the assignment is recorded if the
outstanding balance after the payment is made, including any
interest that will accrue and any payments made to or on behalf
of the borrower (MIP, taxes and insurance, etc.) that will be
added before the mortgage is assigned to HUD, does not exceed the
maximum claim amount. Otherwise, the borrower should be referred
to the local HUD Office to receive payment.
B.If the borrower requests an unscheduled payment, which would
require a recalculation of payments, or requests a change in the
payment plan, the lender may make a payment change and disburse
funds (not to exceed the maximum claim amount) if the mortgage
assignment has not been recorded. The lender should immediately
submit the borrower's new payment plan to the local HUD Office.
Otherwise, the borrower should be referred to the local HUD
Office to receive payment.
The lender cannot receive mortgage insurance benefits in excess of the
maximum claim amount. Therefore, any payments made after notifying
HUD of the intent to assign the mortgage that cause the outstanding
balance to exceed the maximum claim amount are non-reimbursable.
C.If the borrower requests either a line of credit or unscheduled
payment that would cause the outstanding balance to equal or
exceed 98% of the maximum claim amount, either before the lender
has notified HUD of its intent to assign the mortgage or after,
but before the assignment has been recorded, and the lender has
notified the local HUD Office of such an action by following the
procedures in Paragraph 8-3, the local HUD Office must:
1)Verify the payment plan or line of credit request form (used
by the lender) submitted by the lender, that indicates the
requested amount from the borrower, by checking the
borrower's net principal limit against the outstanding
balance shown the system record on HUD's automated MIP
remittance system (see Chapter 7).
2)If the payment can be made under the borrower's net
principal limit, the local HUD Office should countersign the
payment plan or line of credit request form and send a
facscimile of the form to the Insurance Operations Division
in Headquarters.
3)Continue the processing of the assignment so that HUD can
begin making payments to the borrower under the mortgage.
The payment can then be made by HUD to the borrower in the
required time, before the assignment has been recorded. If the
borrower has made the request to HUD after the assignment has
been recorded, HUD will be the lender of record and will not need
to make emergency payments (see Chapter 9 for HUD servicing
procedures).
8-5 DEMAND ASSIGNMENT OF THE MORTGAGE. If the lender fails to make the
required payments under the first mortgage,
A.The local HUD Office, having been notified by the borrower that a
payment was not received, will contact the lender to determine
the reason for non-payment.
B.If the local HUD Office determines that the lender cannot make
the required payment, then the local HUD Office must request that
the Office of Mortgage Insurance Accounting and Servicing (MIAS)
in Headquarters initiate payments. The local HUD Office should
send a memorandum to MIAS designating the case as a Home Equity
Conversion Mortgage and containing the following information:
1) FHA case number.
2) The borrower's name and address.
3)The name of the financial institution and account number for
the borrower's checking or savings account, and other
information necessary to continue making payments to
borrowers who have chosen EFT.
4)A copy of the borrower's current payment plan, indicating
the required payments and due dates, any funds set aside and
the borrower's current principal limit.
5) The amount of the monthly withholding for taxes, if any.
A copy of this memorandum must be sent to the Director, Single
Family Servicing Division, in Headquarters.
C.After the payment is made, the local HUD Office must issue a
written demand to the lender stating that:
1)If the lender plans to resume making payments under the
mortgage, the lender must reimburse HUD for the amount of
the total payment with interest from the date of the payment
to the date reimbursement is received by HUD. An amount and
date of payment and a per diem interest rate must be
specified by the local HUD Office in the demand letter.
Interest will be set at a rate in conformance with the
Treasury Fiscal Requirements Manual.
2)If the lender can not reimburse HUD or resume making
payments under the mortgage, the lender must assign the
mortgage to HUD within 30 days.
a.If the lender chooses to assign the mortgage to HUD,
it must simultaneously file the assignment and submit the
title package to the local HUD Office.
b.The local HUD Office, after reviewing the title
package, will issue a title approval letter. The
lender must submit a claim for insurance benefits no
later than 15 days after the receipt of the title
approval letter (see Paragraph 8-6 of this chapter).
3)If the lender fails to reimburse HUD or assign the mortgage
within 30 days of the demand, the contract of insurance will
be terminated.
4)If the insurance contract is terminated as a result of the
lender's failure to comply with the demand, HUD will not pay
a claim to the lender and the borrower's liability to the
lender under the first mortgage shall be limited to payments
actually made to the borrower and on the borrower's behalf,
inclusive of MIP, taxes and insurance. Any interest that
has accrued will be excluded from liability under the first
mortgage, and no future interest will accrue. Furthermore,
the first mortgage will not be paid until the second
mortgage is due and payable.
5)If the insurance contract is terminated, the local HUD
Office must forward a dated copy of the demand notice sent
to the mortgagee to MIAS, in Headquarters, and identify the
copy as a notice for a Home Equity Conversion Mortgage.
If the servicer of the mortgage is different than the holder, the
local HUD Office should send the notice in Section C. of this
paragraph to both the holder and the servicer of the mortgage.
8-6ASSIGNMENT CLAIMS. Refer to HUD instructions for filing claims for
insurance benefits for HECMs, which can be obtained from the local HUD
Office when obtaining copies of the Form HUD 27011.
A.Lenders that have chosen the assignment insurance option may file
a claim for insurance benefits after the mortgage has been
voluntarily assigned to HUD.
1)The claim must be filed no later than 15 days after the
recording of the assignment.
2)The claim will equal the entire outstanding balance, less
adjustments permitted by the regulations, up to the maximum
claim amount.
3)The lender must also complete and submit with the claim a
certification that states that the title package has been
sent to the local HUD Office.
B.If the mortgage has been assigned to HUD by demand, the lender is
not entitled to file a claim for the entire outstanding balance
on the mortgage.
1)The claim amount will only reimburse the lender for payments
made to or on behalf of the borrower, excluding accrued
interest.
2)HUD will deduct an amount from the payment to the lender as
reimbursement for administrative expenses incurred by
assuming the lender's obligations, including late charges
paid to the borrower due to the lender's failure to make
payment, along with other adjustments permitted by the
regulations.
C.The claim amount can not exceed the maximum claim amount for the
mortgage.
D.If the lender meets the time requirements for voluntarily
assigning the mortgage and for filing a claim, the claim payment
will include interest and might exceed the maximum claim amount.
HUD will pay interest from the date the mortgage was assigned to
the date when payment of the claim is made.
| HECM Guidelines |
| Home Equity Conversion Mortgages |
The HECM FHA insured reverse mortgage can be used
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
