source:
  type: guide
  id: hud-4000-1-iii-r-optional-assignment
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — r. Optional
    Assignment (11/30/2023)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — r. Optional
    Assignment (11/30/2023).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-r-optional-assignment-full
  canonical_id: hud-4000-1-iii-r-optional-assignment-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — r. Optional
    Assignment (11/30/2023)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — r. Optional
      Assignment (11/30/2023)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'r. Optional Assignment (11/30/2023) 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. III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured
      HECMs Handbook 4000.1 1474 Last Revised: 11/26/2025 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; III. SERVICING
      AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1.
      Servicing of FHA-Insured HECMs Handbook 4000.1 1475 Last Revised: 11/26/2025
      • 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 III. SERVICING AND LOSS
      MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing
      of FHA-Insured HECMs Handbook 4000.1 1476 Last Revised: 11/26/2025 • 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. III. SERVICING
      AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1.
      Servicing of FHA-Insured HECMs Handbook 4000.1 1477 Last Revised: 11/26/2025
      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. 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; 5. current flood insurance declaration page, if applicable;
      6. evidence that any repairs related to a hazard or flood insurance loss have
      been completed and the insurance proceeds disbursed appropriately, if applicable;
      7. 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; 8. certification
      that the Mortgage is not subject to an indemnification agreement entered into
      by the Mortgagee assigning the HECM. (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; III. SERVICING AND
      LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing
      of FHA-Insured HECMs Handbook 4000.1 1478 Last Revised: 11/26/2025 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;
      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. 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; III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured
      HECMs Handbook 4000.1 1479 Last Revised: 11/26/2025 • 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 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 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. III. SERVICING
      AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1.
      Servicing of FHA-Insured HECMs Handbook 4000.1 1480 Last Revised: 11/26/2025
      (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).'
  judgment: false
