FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due and Payable Servicing (03/25/2024)

FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due and Payable Servicing (03/25/2024)

b. Due and Payable Servicing (03/25/2024) i. Standard (A) Due and Payable with HUD’s Approval A HECM is eligible for Due and Payable status with HUD’s approval if one of the following conditions applies: • no surviving Borrower maintains the Property as their Principal Residence; • a Borrower fails to occupy the Property for a period of more than 12 consecutive months because of physical or mental illness and the Property is not the Principal Residence of at least one other Borrower; or • an obligation of the Borrower under the HECM is not fulfilled. In such cases, the Mortgagee must submit a Due and Payable request to HUD through HERMIT within 30 Days of a HECM becoming eligible for Due and Payable status. Required Documentation Mortgagees must upload into HERMIT sufficient documentation to support the stated reason for request for HUD approval to call the loan Due and Payable. This documentation must be specific to the stated due and payable reason and must be an original source of information, such as documentation from a taxing authority that property taxes are delinquent or a policy termination letter from an insurance carrier. (B) Automatic Due and Payable Events A HECM becomes automatically Due and Payable, if one of the following conditions applies: • for case numbers assigned before August 4, 2014: • a Borrower died and the Property is no longer the Principal Residence of at least one surviving Borrower; • a Borrower conveyed all of their title in the mortgaged Property and no other Borrower retains title to the Property; or • where the Mortgagee elects to pursue a MOE Assignment, the Mortgagee determines the NBS or HECM is ineligible for such assignment, thus ending the Deferral Period; or • for case numbers assigned on or after August 4, 2014: • a Borrower died, the Property is no longer the Principal Residence of at least one surviving Borrower, and there is no applicable Deferral Period; • a Borrower conveys all of their title in the mortgaged Property and no other Borrower retains title to the Property; or • the Deferral Period for an Eligible NBS ends. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1488 Last Revised: 11/26/2025 ii. Deferral Periods for an Eligible Non-Borrowing Spouse In the event the last surviving Borrower predeceases an NBS, a Deferral Period may be provided for the Due and Payable status where the NBS meets all the Qualifying Attributes and all other HUD requirements herein. (A) Deferral Period Requirements (1) Case Numbers Assigned before August 4, 2014 Where the Mortgagee elects to pursue a MOE Assignment, the HECM will enter a Deferral Period while the Mortgagee completes the required MOE Assessment. If the Mortgagee determines the HECM and the NBS meet all of the requirements for a MOE Assignment, the HECM may be assigned to HUD and HUD will administer the Deferral Period. If the Mortgagee determines the HECM or the NBS do not meet all of the requirements for a MOE Assignment, the Deferral Period ends and the Mortgagee must proceed with calling the HECM Due and Payable without HUD’s approval. (2) Case Numbers Assigned on or after August 4, 2014 Where an Eligible NBS was identified at origination, and remained an Eligible NBS throughout the Borrower’s lifetime, the HECM will automatically enter a Deferral Period when the Mortgagee enters the date of the last surviving HECM Borrower’s death in HERMIT. To continue this Deferral Period, the Mortgagee must ensure the NBS satisfies, and continues to satisfy, the following Qualifying Attributes: • ensure all other obligations of the Borrower continue to be satisfied; and • ensure that the HECM does not become eligible to be called Due and Payable for any reason other than: • the death of the last surviving Borrower; or • the Borrower’s residence in a health care facility for longer than 12 consecutive months. If at any time, the NBS fails to meet any of the Qualifying Attributes or any of the requirements for deferral cease to be met, the Deferral Period ends and the Mortgagee must proceed with calling the HECM Due and Payable without HUD’s approval. (B) Required Documentation During a Deferral Period, the Mortgagee must upload copies of the following documents into HERMIT: • all applicable Due and Payable notifications; and • all required annual NBS certifications. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1489 Last Revised: 11/26/2025 (C) Required Due and Payable Notification to HUD The Mortgagee must notify HUD within 30 Days of determining a HECM is ineligible for a MOE Assignment. For all other cases, the Mortgagee must notify HUD within 60 Days of a HECM becoming Due and Payable without HUD’s approval. The Mortgagee must provide notice by: • entering the Borrower’s date of death in HERMIT for cases where the HECM is Due and Payable due to the Borrower’s death; • initiating a Due and Payable without a HUD Approval timeline in HERMIT for cases where the HECM is Due and Payable due to conveyance; or • completing the Due and Payable timeline in HERMIT for cases where the HECM is Due and Payable due to a Deferral Period ending. The Mortgagee must take whatever steps are necessary to ensure they are able to provide the required notice. Where state privacy laws impair the Mortgagee’s ability to acquire relevant information about the death of a Borrower or an Eligible NBS, the Mortgagee must: • notify HUD, through HERMIT, of the Due and Payable status within 30 Days of the end of the state’s privacy law restriction on the Mortgagee’s access to the information; and • provide the relevant state law and a detailed explanation supporting the delay. Notification During Deferral Periods In the event of a Deferral Period, the Mortgagee must not complete the Due and Payable timeline until the Deferral Period ends. The Mortgagee must complete the appropriate Due and Payable timeline within 60 Days from the end of the Deferral Period, which provides HUD the required notification and changes the HECM status in HERMIT to Due and Payable. (D) Verbal Notification of Death to Mortgagee When a HECM is Due and Payable as a result of a Borrower’s death or a Deferral Period ends as a result of an Eligible NBS’s death, the Mortgagee may accept verbal notification of the death from the heirs or estate for Due and Payable purposes. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1490 Last Revised: 11/26/2025 iii. Required Notifications (A) Standard (1) Due and Payable Notice to Borrower for Reasons Other than Death The Mortgagee must provide notice to the Borrower within 30 Days of receiving HUD’s approval to call a HECM Due and Payable. The notice must: • state that an obligation of the Borrower has not been met; • state specifically what obligation of the Borrower has not been met; • state that failure of the Borrower to comply with the terms of the HECM has resulted in the HECM becoming Due and Payable; • provide notice of the availability of housing counseling; • provide notice of any available Loss Mitigation Options the Mortgagee may offer; and • provide the Borrower 30 Days to notify the Mortgagee of their intention to either: • satisfy the HECM in full; • sell the Property for at least 95 percent of the current appraised value; • provide the Mortgagee with a DIL of Foreclosure; or • correct the matter which resulted in the HECM becoming Due and Payable. (2) Due and Payable Notice to Borrower’s Estate or Heirs due to Death or End of Deferral Period The Mortgagee must provide notice to the Borrower’s estate, heir, or other party with legal title to the Property securing the HECM within 30 Days notifying the Commissioner that the Mortgage is Due and Payable. The notice must provide the following options for the Borrower’s estate, heir, or other party with legal title to the Property to resolve the HECM: • pay the outstanding loan balance including any accrued interest, MIP, and mortgagee advances in full; • provide information to the Mortgagee regarding a spouse of the Borrower who was not also a borrower on the HECM to determine if the spouse may be eligible for a Deferral Period; • sell the Property for at least the lesser of the outstanding principal balance or 95 percent of the current appraised value; • provide the Mortgagee with a DIL of Foreclosure; • correct the condition which resulted in the Mortgage becoming Due and Payable for reasons other than the death of the last surviving Borrower; or • for an Eligible NBS, correct the condition which resulted in an end to the Deferral Period. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1491 Last Revised: 11/26/2025 (3) Notice to Non-Borrowing Spouse at the Start of a Deferral Period Within 30 Days of receiving notice of the last surviving Borrower’s death, the Mortgagee must provide to an Eligible NBS a notice including information on: • the eligibility requirements for a Deferral Period; • the conditions and requirements for the continuation of a Deferral Period; • the ability to cure the default (due to failure to maintain the Property or failure to pay Property Charges) in order to be in compliance with the requirements for the continuation of a Deferral Period; and • the ability to reinstate the Deferral Period, which may be limited under certain circumstances. (4) Due and Payable Notice to Non-Borrowing Spouse at the End of a Deferral Period – Non-Borrowing Spouse Ineligibility When a Deferral Period ends because an Eligible NBS has become an Ineligible NBS, the Mortgagee must notify the NBS within 30 Days after the end of the Deferral Period that: • the Deferral Period has ended; • the HECM is Due and Payable; and • the Borrower’s estate, heir, or other party with authority to dispose of the Property may either: • satisfy the HECM for the lesser of the full debt or 95 percent of the current appraised value; • sell the Property for at least the lesser of the outstanding principal balance or 95 percent of the current appraised value; or • provide the Mortgagee with a DIL of Foreclosure. (5) Due and Payable Notice to Non-Borrowing Spouse at the End of a Deferral Period – HECM Ineligibility When a HECM is in a Deferral Period, if any other applicable requirements for deferral cease to be met, the Mortgagee must notify the Eligible NBS within 30 Days that: • a requirement of the Deferral Period has not been met; • the Eligible NBS has 30 Days to cure the condition of noncompliance; and • failure to cure within such time will result in the Deferral Period ending and the HECM becoming Due and Payable with an explanation of Due and Payable status. (B) Required Documentation The Mortgagee must retain copies of all required notifications in the Servicing File. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1492 Last Revised: 11/26/2025 iv. Selling the Property Secured by a HECM Under the terms of the HECM, the Borrower may sell the Property secured by a HECM at any time for the lesser of the full HECM debt or the current appraised value. If the HECM is Due and Payable, the Property may be sold for the lesser of the full HECM debt, including any and all expenses incurred in connection with the HECM, or 95 percent of the current appraised value. Upon receipt of a request from the Borrower or other party with the legal right to dispose of the Property, the Mortgagee must have the Property appraised in accordance with the Required Appraisals section. The Mortgagee must provide the requestor a copy of the appraisal and retain copies in their Servicing File. For the purposes of this section, sell includes any post-death transfer of title by operation of law. Where the Property is sold for less than full Payoff, the Mortgagee may file a Short Sale Claims (Claim Type 23) following the instructions in this section. v. Required Inspections (A) Standard When a HECM is in Due and Payable status, the Mortgagee must perform a monthly visual inspection of the Property securing the HECM to determine whether the Property is vacant. The Mortgagee must take reasonable action to protect and preserve the Property securing the HECM when it is determined or should have been determined that the Property is vacant or abandoned, if such action does not constitute illegal trespass. “Reasonable action” includes the commencement of foreclosure within the time required in this section. (B) Required Documentation The Mortgagee must retain copies of all inspection reports from the initial inspection through the sale of the Property in their Servicing File. vi. Required Appraisals (A) Standard (1) Appraisal Requested The Mortgagee must have the Property appraised by an FHA Roster Appraiser no later than 30 Days after the Borrower, Borrower’s estate, heir, or other party with authority to dispose of the Property requests an appraisal in connection with a pending sale of the Property. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1493 Last Revised: 11/26/2025 • If the HECM is not Due and Payable, the appraisal is at the Borrower’s expense. • If the HECM is Due and Payable, the appraisal is at the Mortgagee’s expense, but the Mortgagee may be reimbursed from the proceeds of any sale or through the claim process. (2) Appraisal for Foreclosure Sale The Mortgagee must have the Property appraised before a foreclosure sale. The appraisal must have an effective date that is no more than 30 Days before the sale. If a foreclosure sale is rescheduled, the Mortgagee may continue to use the appraisal obtained for the initial foreclosure sale date provided it remains valid and unexpired as of the date of the foreclosure sale. (3) Appraisal for Appraisal-Based Claim If the Mortgagee is submitting an appraisal-based claim, the Mortgagee must use a valid, unexpired appraisal as of the date of claim submission. (B) Required Documentation The Mortgagee must retain copies of all appraisals received in the Servicing File.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due and Payable Servicing (03/25/2024) · source URL · snapshot 8c03836f77f317e1