The U.S. Department of Housing and Urban Development (HUD) has announced a moratorium on reverse mortgage foreclosures during the coronavirus (COVID-19) pandemic. When a foreclosure moratorium is in place, the loan servicer generally can’t start or proceed with a foreclosure.
The Federal Housing Administration (FHA), which is part of HUD, insures most of the reverse mortgage loans in this country through its Home Equity Conversion Mortgage or “HECM” (pronounced “heck-um”) program. With this kind of mortgage, the homeowner receives periodic payments from the lender. In a regular “forward” mortgage, on the other hand, the borrower gets a lump sum upfront and steadily pays it back.
The payments to the homeowner in a reverse mortgage become the loan. With a HECM, the lender's payments to the borrower may be in the form of a lump sum (subject to some limitations), monthly payments, or a line of credit you can draw on as needed. You can also get a combination of monthly installments and a line of credit.
The loan comes due when a triggering event occurs, like when the borrower permanently moves out of the home, sells the property to a new owner, or dies.
As of March 18, 2020, pursuant to Mortgagee Letter 2020-04, FHA-insured HECMs that are in default are subject to a foreclosure moratorium that lasts 60 days. The moratorium applies to the initiation of foreclosures, as well as to the completion of foreclosures in process.
To learn about other foreclosure moratoriums that have gone into place for other kinds of loans, like Fannie Mae and Freddie Mac loans, and in particular areas of the county, see Coronavirus: Foreclosure Relief.
Effective date: March 18, 2020