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r. Optional Assignment (11/10/2026)
i. Definitions
Assignment refers to a Mortgagee’s right to assign the HECM to HUD when the outstanding balance is equal to or greater than 98 percent of the MCA, or when the Borrower has requested a payment that will cause the outstanding balance to equal or exceed 100 percent of the MCA.
Mortgagee-Funded Cure refers to the use of the Mortgagee’s corporate funds to repay or forgive the outstanding corporate advances for Property Charge payments made by the Mortgagee on the Borrower’s behalf with no further repayment to the Mortgagee required.
Mortgagee Optional Election (MOE) Assignment refers to an assignment option available to Mortgagees for cases where an FHA case number was assigned prior to August 4, 2014, and is associated with an Eligible Surviving NBS.
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ii. Standard
In preparing to assign the HECM, the Mortgagee must:
• provide a written notice to the Borrower of intent to assign the HECM to HUD;
• notify HUD of intent to assign by submitting an assignment request through HERMIT; and
• disburse to the Borrower any remaining funds withheld for Hazard Insurance.
Technical assistance for initiating and submitting a Claim Type 22 assignment request is available in the HERMIT User Guide.
If the HECM is assigned to the Secretary, or if payments are made through a second HECM under the demand assignment process, the Secretary is not required to assume responsibility for property charge payments, but will continue to administer payment of taxes for Borrowers from any funds available in an applicable Fully Funded LESA.
(A) Notice to the Borrower
The written notice must state:
• the anticipated date of assignment;
• instructions to the Borrower for making requests for unscheduled or line-of- credit payments to HUD after the assignment date;
• that, if applicable, taxes will continue to be paid from a Property Charge Set- Aside or available LESA funds after assignment;
• that after assignment the Borrower is responsible for payment of taxes where there is no Property Charge Set-Aside or available LESA funds; and
• that after assignment the Borrower is responsible for maintaining and paying for Hazard Insurance, regardless of any funds remaining in a Property Charge Set-Aside or Fully Funded LESA.
(B) Eligibility Criteria
Prior to assigning a HECM, the Mortgagee must:
• be current in its payment of the MIP, including Late Charges and interest on the MIP, as applicable;
• have a good right to assign;
• ensure any repairs related to a hazard and/or flood insurance loss have been completed and any insurance proceeds have been disbursed appropriately; and
• ensure the Mortgagee has not signed an indemnification agreement for the HECM with HUD.
The Mortgagee must also ensure the HECM:
• has no outstanding Property Charge-related corporate advances;
• is not subject to a Repayment Plan;
• is a valid, legally enforceable first lien;
• is secured by the Property with good and marketable title;
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• has no offsets or counterclaims;
• is reflected in HERMIT with a case status of “Endorsed” and a sub-status of “Loan Active”;
• is reflected in HERMIT with the correct Lender, Investor, and Loan Number; and
• if subject to a tax deferral program in which the Borrower participated, the program does not and will not: adversely affect the lien priority of the HECM; or result in a requirement that HUD pay the Borrower’s deferred taxes upon
the Borrower’s death or any other maturity event.
(C) Additional Criteria
In addition to all basic eligibility criteria, the Mortgagee must ensure that additional eligibility criteria are met on a case-by-case basis.
(1) Cases Not Involving an Eligible Non-Borrowing Spouse
For cases not involving an Eligible NBS, the Mortgagee must be current in making the required payments under the HECM to the Borrower. Additionally, the Mortgagee must ensure:
• the Borrower’s obligations under the HECM are current;
• HUD has not been informed of a Due and Payable event, or HUD has been so informed but has denied due and payable approval for the HECM; and
• the outstanding HECM balance is greater than or equal to 97 percent of the MCA unless HUD has approved a line-of-credit advance request that would cause the outstanding balance to exceed 100 percent of the MCA.
No assignment claim will be paid until the outstanding HECM balance is greater than or equal to 98 percent of the MCA.
(2) Cases Involving an Eligible Non-Borrowing Spouse and Assigned an FHA
Case Number on or after August 4, 2014
For cases that involve an Eligible NBS with an FHA case number assigned on or after August 4, 2014, where the HECM is not within a Deferral Period, the Mortgagee must be current in making the required payments under the HECM to the Borrower. Additionally, the Mortgagee must ensure:
• the Borrower’s obligations under the HECM are current;
• HUD has not been informed of a Due and Payable event, other than in the case of the death of the last surviving Borrower or non-occupancy of a Borrower because the Borrower has resided in a health care facility for more than 12 consecutive months, or HUD has been so informed but has denied due and payable approval for the HECM;
• all required certifications have been obtained; and
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• the outstanding HECM balance is greater than or equal to 97 percent of the MCA.
No assignment claim will be paid until the outstanding HECM balance is greater than or equal to 98 percent of the MCA.
(3) Cases Involving an Eligible Non-Borrowing Spouse and Assigned an FHA
Case Number Before August 4, 2014
For cases involving an Eligible Surviving NBS with an FHA case number assigned prior to August 4, 2014, if a Mortgagee does not elect to utilize the MOE Assignment upon the death of the last surviving Borrower or determines that a HECM is ineligible for MOE Assignment, the Mortgagee must notify HUD through HERMIT that the HECM has become Due and Payable. The Mortgagee must commence foreclosure within the established foreclosure time frames.
Where the HECM will be assigned to HUD using the MOE Assignment, the Mortgagee must ensure:
• the Secretary has not been informed of a Due and Payable event, other than in the case of the death of the last surviving Borrower or non- occupancy of a Borrower because the Borrower has resided in a health care facility for more than 12 consecutive months, or the Secretary has been so informed but has denied due and payable approval for the HECM;
• the HECM remains a valid and legally enforceable first lien under state law and no statute of limitations or other barrier exists to the exercising of rights to gain good, marketable title under the HECM, which may include a modification to the HECM, if needed; and
• there are no allegations or claims that would invalidate the HECM or any such allegations or claims have been judicially resolved in favor of the Mortgagee.
iii. Required Documentation
The Mortgagee must submit each of the following documentation packages in support of their Claim Type 22 assignment request:
• compliance package;
• collateral package; and
• servicing package.
For a HECM being assigned in accordance with MOE, the Mortgagee must also submit a MOE Assignment package.
The Mortgagee must submit the documentation packages using HERMIT under the appropriate Claim Type 22 “timeline step.” Technical assistance for initiating and submitting a Claim Type 22 assignment request is available in the HERMIT User Guide.
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HUD will only review complete Claim Type 22 assignment requests. Incomplete requests, including those with missing documentation or those for which the documentation has not been stacked in the order identified below, will be denied. In such cases, the Mortgagee will receive a denial letter in HERMIT that advises the Mortgagee of the reason for denial and identifies the required documentation that was missing or filed improperly. The Mortgagee must re-file a complete Claim Type 22 assignment request if it chooses to proceed with its request.
(A) Compliance Package
The compliance package includes the items listed below which must be stacked in the following order:
1. Borrower’s payment plan and method if the Borrower has available Principal Limit or receives scheduled payments. If the Borrower is paid via Automated Clearing House (ACH), this must include the ACH information and indicate if the ACH account is a checking account or savings account;
2. copy of the Notice of Assignment letter sent to the Borrower;
3. payment history from the Mortgagee’s system through the current month and including the current NPL;
4. most recent LESA analysis and notice to the Borrower where LESA funds are anticipated to be exhausted or insufficient to make the required disbursements for the following year, if applicable;
5. current hazard insurance declaration page, or a document from the hazard insurance provider on its letterhead or from its website that contains the following information:
a. name of the insured
b. address of insured property
c. type of coverage
d. insurance policy number
e. insurance policy limits
f. effective date of the insurance policy
g. expiration date of the insurance policy
h. name and contact information for the insurer
i. annual insurance premium;
6. current flood insurance declaration page, if applicable;
7. evidence that any repairs related to a hazard or flood insurance loss have been completed and the insurance proceeds disbursed appropriately, if applicable;
8. all certifications related to an NBS required specifically for HECMs originated on or after August 4, 2014, or those specifically required for HECMs originated prior to August 4, 2014 and being assigned under a MOE Assignment;
9. certification that the Mortgage is not subject to an indemnification agreement entered into by the Mortgagee assigning the HECM.
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(B) Collateral Package
The collateral package must include the items listed below in the following order:
1. original Note;
2. recorded first Mortgage and addendums, if applicable;
3. Subordination Agreement, if applicable;
4. evidence that the mobile home title has been retired, if applicable;
5. all recorded intervening assignments;
6. proposed assignment to HUD, which does not need to be signed and notarized; and
7. title policy which must include the language “its successors and/or assigns” after the Mortgagee’s name. Title commitments are not acceptable.
(C) Servicing Package
The servicing package must include the items listed below in the following order:
1. second Note, if applicable;
2. recorded second Mortgage and addendums, if applicable; and
3. complete loan agreement, including all exhibits.
(D) MOE Assignment Package
Where applicable, the MOE Assignment package must include the items listed below in the following order:
1. Borrower’s death certificate, if applicable;
2. evidence of Borrower’s residence in health care facility for more than 12 consecutive months, if applicable;
3. copy of Borrower and Eligible Surviving NBS’s marriage certificate, legal opinion certifying the validity of the marriage, or other evidence sufficient to establish the legal validity of the marriage;
4. affirmation that no allegations which would invalidate the HECM exists or, if there were allegations, evidence of the judicial resolution documenting a finding in favor of the Mortgagee;
5. a signed Mortgagee certification that the HECM lien is a valid, legally enforceable first lien; and
6. a signed Eligible Surviving NBS certification as provided in the MOE Assignment section.
iv. Preliminary Review by HUD
HUD will review the Mortgagee’s Claim Type 22 assignment request and if approved, the Mortgagee will receive notification of the decision in HERMIT with instructions on how to proceed.
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v. Completing the Assignment Process
Within 90 calendar days from claim payment, the Mortgagee must send the items listed below to HUD’s Loan Servicing Contractor and complete the Claim Type 22 Assignment Claim timeline steps in HERMIT:
• the endorsed, original first Note;
• the original first Mortgage/deed of trust;
• a check made payable to HUD for any funds remaining from a local, state, or other government property charge assistance program, if applicable; and
• a manifest identifying the FHA case number(s) and all documents enclosed in the shipping package.
After HUD’s Loan Servicing Contractor acknowledges receipt of the above referenced documents in HERMIT, the Mortgagee must submit the assignment for recordation. Only after submitting the assignment for recordation may the Mortgagee complete its claim in HERMIT. Successfully filing the Claim Type 22 will complete the transfer of servicing to HUD.
The Mortgagee must forward the recorded assignment to HUD’s Loan Servicing Contractor as soon as it is received by the Mortgagee, but in no case more than 12 months after recordation. After HUD’s Loan Servicing Contractor acknowledges receipt of the recorded assignment in HERMIT, the Mortgagee will receive a final title approval letter confirming receipt in HERMIT.
If the original note or security instrument is not received within 90 Days of claim payment or the recorded assignment is not received within 12 months of claim payment, the Mortgagee will be responsible for repurchasing the HECM from HUD and may be referred to the appropriate office(s) for sanctioning.
vi. Servicing Responsibilities for a Pending Assignment
A HECM assignment is not complete until the Mortgagee:
• receives approval from HUD to assign the HECM;
• sends the assignment for recording; and
• successfully files the Claim Type 22 for insurance benefits, which completes the transfer of servicing to HUD.
Until a HECM assignment is complete, the Mortgagee must continue to service the HECM, make all scheduled payments, and make all unscheduled payments that will not result in the HECM balance exceeding 100 percent of the MCA.
When an unscheduled payment to a Borrower would cause the HECM balance to exceed 100 percent of the MCA, the Mortgagee may request that HUD make the unscheduled payment. Such requests must be submitted to HUD within three business days of the Mortgagee’s receipt of the Borrower’s request. The Mortgagee must pay any penalties
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and interest due to the Borrower if the Mortgagee does not submit the request to HUD within three business days of receipt of the Borrower’s request.
(A) HUD Advances
In cases where HUD advances funds to the Borrower on the Mortgagee’s behalf, the Mortgagee must initiate a Claim Type 22 assignment request within 30 Days of the HUD advance.
(B) Failure to Initiate Assignment
If the Mortgagee fails to initiate such a request within the allotted time frame, a “Repayment” task will be generated in HERMIT and the Mortgagee must reimburse HUD for the amount of the advance plus any accruals added to the HECM balance through the date the Mortgagee authorizes repayment in HERMIT. Such reimbursement must be completed in HERMIT within 30 Days of the “Repayment” task being generated. The Mortgagee should refer to the HERMIT User Guide for technical instructions on completing such actions.
(C) Denied Assignment Requests
If the Mortgagee’s Claim Type 22 assignment request is denied, the Mortgagee must reimburse HUD for the amount of the advance plus any accruals added to the HECM balance through the date the Mortgagee authorizes repayment in HERMIT. Such reimbursement must be completed in HERMIT within 30 Days of the date of the denial. Technical instructions on completing actions in HERMIT are found in the HERMIT User Guide.
(D) Failure to Reimburse HUD
Mortgagees who fail to reimburse HUD within the allotted time frames may be referred to HUD’s Office of Program Enforcement and/or the Mortgagee Review Board (MRB).