A Mortgagee who elects the Mortgagee Optional Election (MOE) Assignment must ensure that appropriate protections are put in place to ensure a valid, legally enforceable first lien will be assigned to HUD, which may include a modification of the loan documents to provide the following provisions:
1. A deferral of the due and payable status that ordinarily results from the death of the last surviving borrower;
2. The deferral must immediately cease upon the death of any such Eligible Surviving Non-Borrowing Spouse, an Eligible Surviving Non-Borrowing Spouse ceases to satisfy the definition requirements, or the occurrence of an event besides death that would make the Home Equity Conversion Mortgage (HECM) eligible to be called due and payable, whichever occurs first;
3. Upon the occurrence of any of these events, the HECM must become immediately due and payable;
4. An obligation of any Eligible Surviving Non-Borrowing Spouse to continue to meet all contractual obligations of the HECM borrower;
5. An obligation of any Eligible Surviving Non-Borrowing Spouse to meet the certification and other requirements contained in Mortgagee Letter 15-15; and
6. An express waiver of any right to any disbursement under the HECM note, security agreement, and loan agreement.
HUD expects that a Mortgagee electing the MOE Assignment will take whatever action necessary to preserve the Mortgagee’s ability to foreclose on the HECM should any of the following occur before the assignment to the Secretary has been completed:
- the Non-Borrowing Spouse dies,
- the MOE Assignment Deferral Period ends, or
- any event of default, other than the death of the borrower, occurs.
HUD will consent to a modification if the Mortgagee deems it necessary to preserve this ability.
For more information see Mortgagee Letter 15-15 available at https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee
Any questions may be directed to the FHA Resource Center at Toll-Free (800) CALLFHA (225-5342) or by email to answers@hud.gov. Persons with hearing or speech impairments may reach this number by calling the Federal Information Relay Service at (800) 877-8339.