FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Mortgagee Optional Election Assignment (04/29/2024)

FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Mortgagee Optional Election Assignment (04/29/2024)

b. Mortgagee Optional Election Assignment (04/29/2024) The Mortgagee Optional Election (MOE) provides the Mortgagee an option to assign the HECM or foreclose in accordance with the terms of the HECM. The option is available for cases with an FHA case number assigned prior to August 4, 2014 and associated with an Eligible Surviving Non-Borrowing Spouse (NBS). A MOE Assignment claim is the only alternative path to claim payment outside of existing regulations for HECMs with FHA case numbers assigned prior to August 4, 2014; no other alternative path to claim payment exists. The Mortgagee may elect to proceed in accordance with the amendment provided by this section, which provides for a MOE Assignment of an eligible HECM immediately after the death of the last surviving Borrower or upon a Borrower’s residence in a health care facility for more than 12 consecutive months, provided all of the conditions and requirements III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1521 Last Revised: 11/26/2025 established in this section are satisfied. If the Mortgagee elects the MOE Assignment option, the Mortgagee must adhere to the guidance herein. Alternatively, the Mortgagee may elect to enforce its private contractual rights in accordance with the terms of the Note, security instrument, or HECM loan agreement. If the Mortgagee elects to foreclose in accordance with the terms of the HECM, the Mortgagee must adhere to HUD’s Due and Payable policies. i. Definitions HECM Borrower refers to the original Borrower under a Note and Mortgage. The term does not include successors or assigns of a Borrower. MOE Assignment Deferral Period refers to the period of time following the death of the last surviving Borrower for an eligible HECM with an FHA case number assigned prior to August 4, 2014, and associated with an Eligible Surviving NBS, during which time the Due and Payable status of a HECM is deferred based on the continued satisfaction of the requirements for an Eligible Surviving NBS under this section and all other FHA requirements. Non-Borrowing Spouse (NBS) refers to the spouse of a HECM Borrower who is not also a Borrower. Eligible Surviving Non-Borrowing Spouse (NBS), for the purpose of MOE Assignment, refers to an NBS of a HECM Borrower where the HECM was assigned an FHA case number prior to August 4, 2014 and meets the eligibility requirements identified by HUD. Principal Residence refers to the dwelling where the Borrower and, if applicable, an NBS maintain their permanent place of abode, and typically spend the majority of the calendar year. A person may have only one Principal Residence at any one time and the Property is considered to be the Principal Residence: • of any Borrower who is temporarily in a health care institution provided the Borrower’s confinement to a health care institution does not exceed 12 consecutive months; • of any NBS who is temporarily in a health care institution, as long as the Property is the Principal Residence of their Borrower spouse, who physically resides in the Property; • of any NBS who occupies the property as their Principal Residence, when the Borrower resides in a health care institution for a length of time; and • during a Deferral Period of the NBS, who is temporarily in a health care institution, provided the Eligible NBS physically occupied the Property immediately prior to entering the health care institution and such confinement does not exceed 12 consecutive months. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1522 Last Revised: 11/26/2025 Due and Payable Date, for purposes of MOE claim payment, refers to the date when a Mortgagee notifies HUD that it has determined not to utilize the MOE Assignment or has determined that the HECM is not eligible for assignment. Ability to Purchase or Sell After the death of the last Borrower, an NBS may elect to satisfy the HECM and retain the Property securing the HECM for the lesser of the unpaid principal balance or 95 percent of the Property’s appraised value. Regardless of the presence of any NBS, the Property securing the HECM may be sold by the Borrower’s estate for the lesser of the unpaid principal balance or 95 percent of the Property’s appraised value. Nothing in this section may be construed as interrupting or interfering with the ability of the Borrower’s estate to dispose of the Property if they are otherwise legally entitled to do so. Regardless of a Mortgagee’s election under this section, the Mortgagee may provide any Eligible Surviving NBS or the Borrower’s estate with an opportunity to purchase or to market and sell the Property in accordance with HUD’s Due and Payable policies. ii. Standard (A) Required Notifications (1) Notification to Borrower of Assignment When a HECM with an FHA case number assigned before August 4, 2014 reaches 98 percent of the Maximum Claim Amount (MCA) prior to the death of the last surviving Borrower and the Mortgagee exercises its option to assign the HECM to the Secretary, the Mortgagee must notify the Borrower: • that the HECM is being assigned to the Secretary; • that if the Borrower is married to an NBS, the NBS may be eligible for a Deferral Period provided the qualifications of an Eligible Surviving NBS are met and all of the conditions and requirements for a Deferral Period are, and continue to be, met; and • of the requirements for an Eligible Surviving NBS as well as the conditions and requirements for an applicable Deferral Period. (2) Notice of Election to Eligible Surviving Non-Borrowing Spouse and/or Borrower’s Estate Within 30 Days after the Mortgagee’s election to either pursue a MOE Assignment or foreclose, the Mortgagee must provide notice based on the election made under this section. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1523 Last Revised: 11/26/2025 If the Mortgagee elects to pursue a MOE Assignment, the Mortgagee must provide the eligibility requirements to the Eligible Surviving NBS and Borrower’s estate. If the Mortgagee elects to pursue foreclosure, the Mortgagee must inform the Eligible Surviving NBS and the Borrower’s estate that the Mortgagee will provide a period not to exceed six months during which the Eligible Surviving NBS or the Borrower’s estate may satisfy the HECM or market and sell the Property in accordance with this section. (3) Notification to HUD of Borrower’s Death Within 60 Days of the Borrower’s death, the Mortgagee must notify HUD, via HERMIT, that the HECM is eligible to be called Due and Payable under the original terms of the HECM entered into between the Mortgagee and the Borrower. (4) Mortgagee Optional Election to Assign for HECMs with Case Numbers Assigned before August 4, 2014 For cases where the last surviving Borrower is survived by an NBS, the Mortgagee must enter the Borrower’s date of death in HERMIT and then follow the requirements and conditions for the Mortgagee Optional Election to assign. Where the Mortgagee elects to pursue a MOE Assignment, the Mortgagee must not complete the Due and Payable timeline in HERMIT until such time as the Deferral Period ends. Where the Mortgagee elects to foreclose in accordance with the terms of the HECM, the Mortgagee must complete the appropriate Due and Payable timeline in order to provide HUD the required notification. (B) Mortgagee Election of MOE Assignment To notify HUD of its election to pursue a MOE Assignment, the Mortgagee must upload into HERMIT a statement of such election on company letterhead, at which time the HECM will begin a Deferral Period. (C) MOE Assessment The Mortgagee must perform an assessment to determine whether the NBS and the HECM meet the eligibility requirements for a MOE Assignment. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1524 Last Revised: 11/26/2025 iii. Eligibility Requirements for MOE Assignment (A) Non-Borrowing Spouse Eligibility Requirements Where the Mortgagee has made the MOE Assignment election, an NBS of a Borrower is an Eligible Surviving NBS when the NBS: • was either: • legally married, as determined by the law of the state in which the spouse and Borrower reside(d) or the state of celebration, to the Borrower at the time of HECM closing and remained married to the Borrower until the Borrower’s death; or • engaged in a committed relationship with the Borrower akin to marriage but was prohibited, at the time of HECM origination, from legally marrying the Borrower based on the sex of both the Borrower and the NBS, but was legally married prior to the death of the Borrower, as determined by the law of the state in which the spouse and the Borrower reside(d) or the state of celebration, to the Borrower and: ▪ remained married until the Borrower’s death; or ▪ remains married to the Borrower, in situations in which the Borrower has resided in a health care institution for more than 12 consecutive months; and • currently resides and resided in the Property secured by the HECM as their Principal Residence at origination of the HECM and throughout the duration of the Borrower’s life. (B) HECM Eligibility Requirements for MOE Assignment to HUD Where the Mortgagee has made the MOE Assignment election, only a HECM that satisfies the following requirements can be assigned: • the HECM was assigned an FHA case number prior to August 4, 2014; • there is an Eligible Surviving NBS; • the Eligible Surviving NBS agrees to certify annually that all eligibility requirements continue to be satisfied; • the HECM is not in default or eligible to be called Due and Payable for any reason other than the death of the last surviving Borrower; • 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; • the Mortgagee has taken all steps necessary to ensure 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; • the Mortgagee agrees to indemnify the Secretary for any loss incurred as a result of any impediment to the Secretary obtaining good and marketable title, unless such loss is solely due to acts of the Secretary after assignment; and III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1525 Last Revised: 11/26/2025 • the Mortgagee has obtained all required information, certifications, and agreements from any Eligible Surviving NBS and any other necessary party as set forth herein. A HECM that is subject to a pre-existing loss mitigation Repayment Plan for unpaid Property Charges must be brought current on all Property Charges in order for the HECM to be eligible for a MOE assignment. iv. MOE Assignment Process and Documentation Requirements A Mortgagee may not assign a HECM to HUD where the MOE Assignment Deferral Period has ceased, but may assign a HECM after the MOE Assignment Deferral Period has been reinstated in accordance with Termination and Reinstatement of the MOE Assignment Deferral Period. The Mortgagee must initiate the MOE Assignment process through HERMIT. (A) Modification of Contract Prior to MOE Assignment The Mortgagee 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 HECM documents to provide the following provisions: • a deferral of the Due and Payable status that ordinarily results from the death of the last surviving Borrower; • the deferral must immediately cease upon the earliest occurrence of: • the death of any such Eligible Surviving NBS; • an Eligible Surviving NBS ceases to satisfy the definition requirements; or • the occurrence of an event besides death that would make the HECM eligible to be called Due and Payable; • an obligation of any Eligible Surviving NBS to continue to meet all contractual obligations of the Borrower; • an obligation of any Eligible Surviving NBS to meet the certification and other requirements; and • an express waiver of any right to any Disbursement under the HECM Note, security agreement, and loan agreement. The Mortgagee must take whatever action necessary, including modification if the Mortgagee deems it necessary, to preserve its ability to foreclose on the HECM should any of the following occur before the assignment to the Secretary has been completed: • the NBS dies; • the MOE Assignment Deferral Period ends; or • any event of default, other than the death of the Borrower, occurs. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1526 Last Revised: 11/26/2025 (B) Required Certifications (1) MOE Assignment Required Mortgagee Certification The Mortgagee must certify at assignment to the following: “I, , as authorized representative of , the Mortgagee, certify that I have personally reviewed the HECM documents as well as the information provided by , the Eligible Surviving Non-Borrowing Spouse, and certify that the following are true and correct: 1. The HECM is not eligible to be called Due and Payable for any reason other than in the case of the death of the last surviving Borrower or non-occupancy because the Borrower has resided in a health care facility for more than 12 consecutive months and all other obligations of the HECM Borrower have been and continue to be met; 2. 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; 3. There is a valid, legally enforceable first lien with no impediments to securing good, marketable title; 4. [Insert as applicable based on Mortgagee’s election: The HECM note, security agreement, and loan agreement have been modified establishing the conditions and requirements for the deferral of Due and Payable status as well as obligating any Eligible Surviving Non- Borrowing Spouse to continue to meet all contractual obligations and expressly waiving any right to any disbursements under the HECM note, security agreement, and the loan agreement]; and 5. I have determined that there [is/are] [#] Eligible Surviving Non- Borrowing Spouse(s), identified as [insert names], and have obtained all required information, acknowledgements, agreements, and certifications from such Eligible Surviving Non-Borrowing Spouse(s). I certify that the information provided in connection with this assignment is true and correct. I hereby agree on behalf of the Mortgagee that it will indemnify the Secretary for any amounts paid pursuant to this election should any of the information provided prove false. Further, I hereby agree on behalf of the Mortgagee that it will indemnify the Secretary any amounts paid pursuant to this election in the event the Secretary is subsequently impeded from obtaining good and marketable title as a result of the Mortgagee’s failure to assign a valid, legally enforceable first lien.” I, the undersigned, certify under penalty of perjury that the information provided above is true and correct. WARNING: Anyone who knowingly submits a false claim or makes a false statement is subject to criminal and/or civil penalties, including confinement for up to 5 years, fines, and civil and III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1527 Last Revised: 11/26/2025 administrative penalties. (18 U.S.C. §§287, 1001, 1010, 1012, 1014; 31 U.S.C. §3729, 3802). (2) Optional Revision to Mortgagee Certification Where a Mortgagee is unable, due to state law requirements, to truthfully certify to item number three in the Mortgagee Certification, the optional language that may be used is as follows: “At assignment, there is a valid, legally enforceable first lien with no impediments to securing good, marketable title, and upon assignment, the Secretary will have a valid, legally enforceable first lien with no impediments to securing good and marketable title.” Additionally, where a Mortgagee is unable, due to state law, to certify using the aforementioned language as is written, the Mortgagee may use the language below in lieu of the last sentence in the Mortgagee Certification: “Further, I hereby agree on behalf of the Mortgagee that it will indemnify the Secretary for any amounts paid pursuant to this election in the event the Secretary is subsequently impeded from obtaining good and marketable title as a result of the Secretary’s inability to enforce a valid, legally enforceable first lien.” (3) MOE Assignment Required Eligible Surviving Non-Borrowing Spouse Certification at MOE Assignment Election The Mortgagee must obtain a signed agreement, acknowledgement, and certification at assignment from any Eligible Surviving NBS verifying the established conditions and requirements are met. The agreement, acknowledgement, and certification must state: “I hereby agree, acknowledge, and certify that I was married to and remained married to _____________, a HECM Borrower, at the time the HECM was originated and throughout the remainder of their life. I certify that the information provided in this agreement, acknowledgement, and certification is true and correct. I acknowledge that my spouse’s HECM is currently eligible to be called Due and Payable under the original terms of the HECM contract as a result of [his/her] death and that the Mortgagee is electing to assign my spouse’s HECM to FHA. I further acknowledge and agree that if assignment is accepted, the HECM will not be called Due and Payable until my death or such time as I cease to be eligible for a deferral. As a result, I acknowledge that I will be permitted to remain in the property until my death provided I continue to comply with the terms of this agreement and certification. I further understand and agree that in order to qualify for a deferral of Due and Payable status, I must: III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1528 Last Revised: 11/26/2025 1. disclose and provide consent to the verification of my Social Security Number; 2. continue to occupy the property securing my spouse’s HECM as my principal residence; 3. acknowledge and agree that I will receive no disbursements from my spouse’s HECM; 4. ensure that all obligations of the HECM Borrower continue to be satisfied without reliance on any disbursement from the HECM, including the obligation to pay property charges and insurance even if the HECM would have allowed for the payment of these charges from the available proceeds; 5. ensure the HECM is not and will not become eligible to be Due and Payable for any reason other than the death of the last surviving Borrower or non-occupancy because the Borrower has resided in a health care facility for more than 12 consecutive months; 6. annually certify that all conditions necessary for assignment are and continue to be met; and 7. provide any documentation required by the Mortgagee to evidence my compliance with the requirements of the assignment and deferral of Due and Payable status. I agree and acknowledge that should any of these obligations cease to be met the Deferral Period shall cease, my spouse’s HECM will immediately become Due and Payable, and, as a result, I must satisfy the HECM in accordance with existing HUD policy in order to remain in the property further.” I, the undersigned, certify under penalty of perjury that the information provided above is true and correct. WARNING: Anyone who knowingly submits a false claim or makes a false statement is subject to criminal and/or civil penalties, including confinement for up to 5 years, fines, and civil and administrative penalties. (18 U.S.C. §§ 287, 1001, 1010, 1012, 1014; 31 U.S.C. §§ 3729, 3802). (C) Required Documentation The Mortgagee must secure the following information, certifications, and enforceable agreements and provide documentation of such with the assignment: • any Eligible Surviving NBS’s Social Security Number (SSN); • that the Property is and has been, since the origination of the HECM, the Principal Residence of any Eligible Surviving NBS, and obtain a written agreement from such Eligible Surviving NBS that they will continue to occupy the Property securing the HECM as their Principal Residence; • that all obligations of the Borrower(s) contained in the HECM documents have been and continue to be satisfied, and obtain a written agreement from any Eligible Surviving NBS to continue to satisfy the obligations of the Borrower(s); III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 3. Programs and Products - Mortgagee Optional Election Assignment (04/29/2024) Handbook 4000.1 1529 Last Revised: 11/26/2025 • written acknowledgement and agreement from the Eligible Surviving NBS that no further Disbursements under the HECM are required to be or will be made; • written acknowledgement and agreement from the Eligible Surviving NBS that the HECM may immediately be called Due and Payable if any event of default other than the death of the last surviving Borrower or non-occupancy because the Borrower has resided in a health care facility for more than 12 consecutive months occurs at any time; and • written acknowledgement and agreement from any Eligible Surviving NBS that the HECM will become immediately Due and Payable should the Eligible Surviving NBS cease to meet any of the eligibility requirements, conditions for acceptance, or ongoing obligations under the HECM. v. Termination and Reinstatement of the MOE Assignment Deferral Period If an NBS fails to meet, or ceases to meet at any time, the definition of an Eligible Surviving NBS, the MOE Assignment Deferral Period terminates immediately and there is no opportunity to cure the failure to meet this required definition. When the MOE Assignment Deferral Period ceases or is determined to be unavailable solely because the HECM is eligible to be called Due and Payable for a reason other than the death of the Borrower, the Mortgagee must provide an Eligible Surviving NBS 30 Days to cure the default and reinstate the MOE Assignment Deferral Period as follows: • all defaults must be cured in fact within the time period permitted; a default is not cured by entering into a Repayment Plan; • if the default is cured within such time, the MOE Assignment Deferral Period must be reinstated, unless: • reinstatement of the MOE Assignment Deferral Period has occurred within the past two years immediately preceding the current notification to the Eligible Surviving NBS that the HECM is Due and Payable; • reinstatement of the MOE Assignment Deferral Period will preclude foreclosure if the HECM becomes Due and Payable at a later date; or • reinstatement of the MOE Assignment Deferral Period will adversely affect the priority of the HECM lien; • if the default is not cured within such time, the Mortgagee must proceed in accordance with the established time frames to initiate foreclosure and reasonable diligence in prosecuting foreclosure as required by 24 CFR § 206.125 and all other regulations and requirements if it wishes to perfect its claim for insurance benefits; and • even after a foreclosure proceeding begins, an Eligible Surviving NBS may cure the condition which resulted in the MOE Assignment Deferral Period ceasing, thus reinstating the HECM and MOE Assignment Deferral Period and allowing the mortgage insurance to remain in effect. The Mortgagee may require the Eligible Surviving NBS to pay any costs that the Mortgagee incurred to reinstate the HECM, including foreclosure costs and reasonable attorney’s fees. Such costs III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages

Source: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Mortgagee Optional Election Assignment (04/29/2024) · source URL · snapshot 8c03836f77f317e1