Mortgagee Optional Election Assignment for Home Equity Conversion Mortgages (HECMs)

On June 12, the Federal Housing Administration (FHA) published Mortgagee Letter 2015-15, Mortgagee Optional Election Assignment for Home Equity Conversion Mortgages (HECMs) with an FHA Case Number assigned prior to August 4, 2014.  This Mortgagee Letter sets out an alternative path to claim payment, the Mortgagee Optional Election (MOE) Assignment, that mortgagees may choose for an eligible HECM with an Eligible Surviving Non-Borrowing Spouse and an FHA case number assigned prior to August 4, 2014. 

Under the MOE, mortgagees may assign eligible HECMs to FHA, despite the HECM being otherwise eligible to be called due and payable as a result of the death of the last surviving borrower. The assignment allows eligible surviving Non-Borrowing Spouses to remain in the home. 

FHA recently rescinded Mortgagee Letter 2015-03, which provided for a MOE Assignment that required a HECM to comply with either a Factor Test or a Principal Limit Test—tests that provided certain eligibility parameters—to be eligible for the MOE Assignment. Mortgagee Letter 2015-15 removes the Factor Test and Principal Limit Test requirements from the MOE Assignment option, and also expands timeframes for certain mortgagee actions related to:

  • The mortgagee’s notification to FHA of its election of the MOE Assignment path to claim payment; and
  • The subsequent assignment of the eligible HECM to FHA.

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