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u. Mortgage Insurance Termination (04/29/2024)
i. Definition
A Mortgage Insurance Termination refers to the ending of FHA mortgage insurance, at which time all rights of the Mortgagee shall terminate, including the right to file a claim for insurance benefits, and all obligations of HUD cease immediately.
ii. Standard
(A) Termination of Mortgage Insurance
The Mortgagee may terminate the FHA insurance contract when the HERMIT case status is Endorsed and one of the following events has occurred:
• Prepayment in Full, including sale of the Property by the Borrower or other authorized party, or a HECM-to-HECM Refinance;
• acquisition of title through DIL by the Mortgagee or other party at a foreclosure sale, and no insurance claim will be submitted to HUD; or
• acquisition of title by the Mortgagee through a DIL or foreclosure, or the Property is sold by the Borrower or other authorized party for less than the full Payoff, and a claim for insurance will not be submitted.
The Mortgagee must report termination of a HECM to HUD by initiating a Termination transaction via HERMIT within 15 Days of a Payoff. Where the termination will result in submission of a claim, the claim serves as notice of
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III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages
1. Servicing of FHA-Insured HECMs
termination. Claims must be submitted based on the date the FHA case number was assigned, as follows:
• before September 19, 2017, within 15 Days of the Property being sold; or
• on or after September 19, 2017, within 30 Days of the Property being sold.
(B) Voluntary Termination of Mortgage Insurance
(1) Definition
A Voluntary Termination of Mortgage Insurance refers to a mutual agreement between the Borrower and the Mortgagee to terminate FHA mortgage insurance.
(2) Standard
The Borrower and the Mortgagee may agree to voluntarily terminate FHA mortgage insurance at any time.
(a) Borrower’s Consent to Voluntary Termination
The Mortgagee must obtain a signed Borrower’s Consent to Voluntary Termination of FHA Mortgage Insurance from each Borrower. The form must be on the Mortgagee’s letterhead and must follow the format found in the model document.
(b) Reporting a Voluntary Termination
To report a voluntary termination, the Mortgagee must initiate a Termination transaction via HERMIT within 15 Days of receiving the executed Borrower’s consent form.
(C) Effective Date of Termination
(1) Standard
The effective date of termination of the contract of insurance is the date on which one of the following occurs:
• the Mortgagee has received notice from HUD that it approves the voluntary Termination transaction;
• the Mortgagee has notified HUD that the HECM was prepaid;
• the Property was acquired by another party and the Mortgagee notifies the Commissioner that a claim will not be filed; or
• the Mortgagee fails to make the payments to the Borrower.
Where the Mortgagee acquires the Property through a foreclosure sale or DIL, the effective date of termination of the contract of insurance is the date on which a claim for insurance benefits is settled.
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III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages
1. Servicing of FHA-Insured HECMs
(2) Required Documentation
The Mortgagee must note in the Servicing File and initiate the termination transaction in HERMIT on the date on which the:
• voluntary termination request is received;
• HECM was prepaid; or
• Property was acquired by another party at a foreclosure sale and the Mortgagee determines that a claim will not be filed.
If the Mortgagee wishes to submit a claim for insurance benefits, such claim must be submitted via HERMIT after selling a Property acquired through foreclosure sale or DIL. See the Due and Payable Servicing section for further information.
(D) Termination of MIP Payments
The Mortgagee must pay MIP due through the effective date of termination for HECMs paid in full or where the Mortgagee or other party acquires the Property through sale, DIL, or foreclosure sale and no claim for insurance benefits will be submitted.
Where the termination will result in submission of a claim, the Mortgagee must pay the MIP due based on the date the FHA case number was assigned, as follows:
• before September 19, 2017, until the claim for insurance benefits is paid; or
• on or after September 19, 2017, until the date of the foreclosure sale, the date the DIL is recorded, or the date a sale by the Borrower or authorized party is completed.