What are the Mortgagee responsibilities for a HECM Fully-Funded Life Expectancy Set-Aside?

When servicing Home Equity Conversion Mortgages (HECM) for which property charges are paid through a Fully-Funded Life Expectancy Set-Aside, Mortgagees are responsible for ensuring that:
  • Payments are disbursed before bills become delinquent;
  • Early payments are made to take advantage of a discount (whenever it is to the Borrower’s benefit);
  • Life Expectancy Set-Aside funds are not held in an escrow account;
  • Payments for property charges are added to the mortgage balance when the Mortgagee disburses funds to the taxing authority, insurance carrier, or the Borrower; and
  • The Borrower is notified, in writing, within 15 calendar days of the annual analysis when remaining funds are exhausted or are not sufficient to pay the next year’s property charge payments and the Borrower will be responsible for paying the property charges.
If there are no funds or insufficient funds remaining in the Set-Aside, the Mortgagee must:
  • Notify the Borrower, in writing, within 30 days of the Mortgagee receiving notification that a property charge payment is outstanding;
  • Recommend the Borrower speak with a HUD-Approved Housing Counselor; and
  • Inform HUD within 30 days of the Mortgagee receiving notification that a property charge payment is outstanding.
 For more information see Mortgagee Letters 2014-21 and 2016-10 and the attached revised HECM Financial Assessment and Property Charge Guide available at https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-02629