FHA Single Family Housing Policy Handbook 4000.1, III. SERVICING AND LOSS MITIGATION > B. Title II Insured Housing Programs Reverse Mortgages > 1. Servicing of FHA-Insured HECMs — t. Repurchase of Previously Assigned HECM

FHA Single Family Housing Policy Handbook 4000.1, Part III — t. Repurchase of Previously Assigned HECM (04/29/2024)

Effective 2024-04-29 · publisher's stamp for this provision

In force by default — effective 2024-04-29. This is the version that governs unless your firm has adopted the Update 18 revision.

t. Repurchase of Previously Assigned HECM (04/29/2024) i. Definition Repurchase refers to HUD’s requirement that the HECM be returned to the Mortgagee who assigned it due to the discovery of the Mortgagee’s noncompliance with the regulations, which allowed a condition to exist that would have made the HECM unassignable. ii. Standard The Mortgagee must repurchase a HECM upon notification from HUD if any of the following conditions of noncompliance occurred at or prior to the time of assignment: • a title defect discovered in relation to preparations for a foreclosure or Deed-In- Lieu (DIL) after assignment or after HUD acquired the Property through foreclosure; or • an occurrence of a Due and Payable event of which HUD was not made aware. (A) Initiating the Repurchase Process HUD initiates a repurchase using the repurchase timeline in HERMIT. HUD will provide a repurchase notification to the Mortgagee. (1) Curable Defects HUD will provide the Mortgagee with a pre-repurchase letter, detailing the defect and allowing up to 30 Days to cure. The Mortgagee must take the appropriate action to correct a defect if curable and provide HUD with supporting documentation of such correction. The Mortgagee may request a maximum of three 30-Day extensions. The Mortgagee must submit any request for extension in HERMIT. HUD will cancel the repurchase timeline if the Mortgagee cures the defect within the 30-Day period or any extension period approved by HUD. (2) Incurable Defects The Mortgagee must proceed with the repurchase within 30 Days of receipt of HUD’s repurchase notification where: • a title defect exists that cannot be corrected; or • the repurchase involves a HECM that was eligible to be Due and Payable when it was assigned. (B) Completing the Repurchase Process If the repurchase defect is incurable or the Mortgagee fails to cure the defect before the pre-repurchase period has expired, the Mortgagee must authorize HUD to draft the applicable funds from the Mortgagee’s specified account. The Mortgagee must complete this action in HERMIT within 30 Days of the date HUD created the repurchase timeline or the expiration of the pre-repurchase period, if applicable. The Mortgagee must prepare one of the following documents for HUD’s execution: • an assignment transferring the HECM from HUD to the Mortgagee; or • a deed reconveying the Property for which HUD holds title to the Mortgagee. Upon receipt of the executed document from HUD, the Mortgagee must have the document recorded and coordinate with HUD’s HECM servicing contractor to transfer servicing back to the Mortgagee. The Mortgagee must reimburse HUD for all expenses incurred in connection with the acquisition and reassignment or reconveyance. The reimbursement must include: • interest on the amount of the insurance benefits refunded by the Mortgagee from the date the claim was paid to the date of the refund at an interest rate set in accordance with the Treasury Financial Manual; and • HUD’s cost of holding the Property and servicing the HECM, accruing on a daily basis, from the date of assignment to the date of reassignment. iii. Required Documentation The Mortgagee must send the Borrower and upload in HERMIT a notification that the HECM has been transferred back to the Mortgagee. iv. Subsequent Application for Insurance Benefits The Mortgagee may re-apply for insurance benefits at a subsequent date. The Mortgagee will not be reimbursed for any expenses incurred in connection with the Property after it has been reconveyed or the HECM reassigned, or paid any debenture interest accrued after the date of initial conveyance. Any reduction in HUD’s estimate of the value of the Property occurring from the time of reconveyance to the time of reapplication will be deducted from the insurance benefits.

Update 18 revision — optional now, mandatory 2026-11-10. Issued 2026-08-12 and stamped effective 2026-11-10. HUD's transmittal permits implementation immediately; it becomes required on 2026-11-10. A firm that has already adopted Update 18 should read this version.

t. Repurchase of Previously Assigned HECM (11/10/2026) i. Definition Repurchase refers to HUD’s requirement that the HECM be returned to the Mortgagee who assigned it due to the discovery of the Mortgagee’s noncompliance with the regulations, which allowed a condition to exist that would have made the HECM unassignable. ii. Standard The Mortgagee must repurchase a HECM upon notification from HUD if any of the following conditions of noncompliance occurred at or prior to the time of assignment: • a title defect discovered in relation to preparations for a foreclosure or Deed-In- Lieu (DIL) after assignment or after HUD acquired the Property through foreclosure; or • an occurrence of a Due and Payable event of which HUD was not made aware. (A) Initiating the Repurchase Process HUD initiates a repurchase using the repurchase timeline in HERMIT. HUD will provide a repurchase notification to the Mortgagee. (1) Curable Defects HUD will provide the Mortgagee with a pre-repurchase letter, detailing the defect and allowing up to 30 Days to cure. The Mortgagee must take the appropriate action to correct a defect if curable and provide HUD with supporting documentation of such correction. The Mortgagee may request a maximum of three 30-Day extensions. The Mortgagee must submit any request for extension in HERMIT. HUD will cancel the repurchase timeline if the Mortgagee cures the defect within the 30-Day period or any extension period approved by HUD. (2) Incurable Defects The Mortgagee must proceed with the repurchase within 30 Days of receipt of HUD’s repurchase notification where: • a title defect exists that cannot be corrected; or • the repurchase involves a HECM that was eligible to be Due and Payable when it was assigned. If it is determined that a HECM for which a CT-22 Assignment Claim has been paid did not, at the time of the initial assignment application and continuously through claim payment, meet all assignment claim criteria, the Mortgagee must repurchase the HECM from the Secretary within 30 Days of notice from FHA of the defect. (B) Completing the Repurchase Process If the repurchase defect is incurable or the Mortgagee fails to cure the defect before the pre-repurchase period has expired, the Mortgagee must authorize HUD to draft the applicable funds from the Mortgagee’s specified account. The Mortgagee must complete this action in HERMIT within 30 Days of the date HUD created the repurchase timeline or the expiration of the pre-repurchase period, if applicable. The Mortgagee must prepare one of the following documents for HUD’s execution: • an assignment transferring the HECM from HUD to the Mortgagee; or • a deed reconveying the Property for which HUD holds title to the Mortgagee. Upon receipt of the executed document from HUD, the Mortgagee must have the document recorded and coordinate with HUD’s HECM servicing contractor to transfer servicing back to the Mortgagee. The Mortgagee must reimburse HUD for all expenses incurred in connection with the acquisition and reassignment or reconveyance. The reimbursement must include: • interest on the amount of the insurance benefits refunded by the Mortgagee from the date the claim was paid to the date of the refund at an interest rate set in accordance with the Treasury Financial Manual; and • HUD’s cost of holding the Property and servicing the HECM, accruing on a daily basis, from the date of assignment to the date of reassignment. iii. Required Documentation The Mortgagee must send the Borrower and upload in HERMIT a notification that the HECM has been transferred back to the Mortgagee. iv. Subsequent Application for Insurance Benefits The Mortgagee may re-apply for insurance benefits at a subsequent date. The Mortgagee will not be reimbursed for any expenses incurred in connection with the Property after it has been reconveyed or the HECM reassigned, or paid any debenture interest accrued after the date of initial conveyance. Any reduction in HUD’s estimate of the value of the Property occurring from the time of reconveyance to the time of reapplication will be deducted from the insurance benefits.

Source: FHA Single Family Housing Policy Handbook 4000.1, Update 18 (issued 2026-08-12) · source URL · snapshot 8c03836f77f317e1