source:
  type: guide
  id: hud-4000-1-iii-b-due-and-payable-servicing
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due and
    Payable Servicing (03/25/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due
    and Payable Servicing (03/25/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-b-due-and-payable-servicing-full
  canonical_id: hud-4000-1-iii-b-due-and-payable-servicing-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Due and
    Payable Servicing (03/25/2024)
  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 — b. Due
      and Payable Servicing (03/25/2024)
    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: 'b. Due and Payable Servicing (03/25/2024) i. Standard (A) Due
      and Payable with HUD’s Approval A HECM is eligible for Due and Payable status
      with HUD’s approval if one of the following conditions applies: • no surviving
      Borrower maintains the Property as their Principal Residence; • a Borrower fails
      to occupy the Property for a period of more than 12 consecutive months because
      of physical or mental illness and the Property is not the Principal Residence
      of at least one other Borrower; or • an obligation of the Borrower under the
      HECM is not fulfilled. In such cases, the Mortgagee must submit a Due and Payable
      request to HUD through HERMIT within 30 Days of a HECM becoming eligible for
      Due and Payable status. Required Documentation Mortgagees must upload into HERMIT
      sufficient documentation to support the stated reason for request for HUD approval
      to call the loan Due and Payable. This documentation must be specific to the
      stated due and payable reason and must be an original source of information,
      such as documentation from a taxing authority that property taxes are delinquent
      or a policy termination letter from an insurance carrier. (B) Automatic Due
      and Payable Events A HECM becomes automatically Due and Payable, if one of the
      following conditions applies: • for case numbers assigned before August 4, 2014:
      • a Borrower died and the Property is no longer the Principal Residence of at
      least one surviving Borrower; • a Borrower conveyed all of their title in the
      mortgaged Property and no other Borrower retains title to the Property; or •
      where the Mortgagee elects to pursue a MOE Assignment, the Mortgagee determines
      the NBS or HECM is ineligible for such assignment, thus ending the Deferral
      Period; or • for case numbers assigned on or after August 4, 2014: • a Borrower
      died, the Property is no longer the Principal Residence of at least one surviving
      Borrower, and there is no applicable Deferral Period; • a Borrower conveys all
      of their title in the mortgaged Property and no other Borrower retains title
      to the Property; or • the Deferral Period for an Eligible NBS ends. III. SERVICING
      AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2.
      Default Servicing Handbook 4000.1 1488 Last Revised: 11/26/2025 ii. Deferral
      Periods for an Eligible Non-Borrowing Spouse In the event the last surviving
      Borrower predeceases an NBS, a Deferral Period may be provided for the Due and
      Payable status where the NBS meets all the Qualifying Attributes and all other
      HUD requirements herein. (A) Deferral Period Requirements (1) Case Numbers Assigned
      before August 4, 2014 Where the Mortgagee elects to pursue a MOE Assignment,
      the HECM will enter a Deferral Period while the Mortgagee completes the required
      MOE Assessment. If the Mortgagee determines the HECM and the NBS meet all of
      the requirements for a MOE Assignment, the HECM may be assigned to HUD and HUD
      will administer the Deferral Period. If the Mortgagee determines the HECM or
      the NBS do not meet all of the requirements for a MOE Assignment, the Deferral
      Period ends and the Mortgagee must proceed with calling the HECM Due and Payable
      without HUD’s approval. (2) Case Numbers Assigned on or after August 4, 2014
      Where an Eligible NBS was identified at origination, and remained an Eligible
      NBS throughout the Borrower’s lifetime, the HECM will automatically enter a
      Deferral Period when the Mortgagee enters the date of the last surviving HECM
      Borrower’s death in HERMIT. To continue this Deferral Period, the Mortgagee
      must ensure the NBS satisfies, and continues to satisfy, the following Qualifying
      Attributes: • ensure all other obligations of the Borrower continue to be satisfied;
      and • ensure that the HECM does not become eligible to be called Due and Payable
      for any reason other than: • the death of the last surviving Borrower; or •
      the Borrower’s residence in a health care facility for longer than 12 consecutive
      months. If at any time, the NBS fails to meet any of the Qualifying Attributes
      or any of the requirements for deferral cease to be met, the Deferral Period
      ends and the Mortgagee must proceed with calling the HECM Due and Payable without
      HUD’s approval. (B) Required Documentation During a Deferral Period, the Mortgagee
      must upload copies of the following documents into HERMIT: • all applicable
      Due and Payable notifications; and • all required annual NBS certifications.
      III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse
      Mortgages 2. Default Servicing Handbook 4000.1 1489 Last Revised: 11/26/2025
      (C) Required Due and Payable Notification to HUD The Mortgagee must notify HUD
      within 30 Days of determining a HECM is ineligible for a MOE Assignment. For
      all other cases, the Mortgagee must notify HUD within 60 Days of a HECM becoming
      Due and Payable without HUD’s approval. The Mortgagee must provide notice by:
      • entering the Borrower’s date of death in HERMIT for cases where the HECM is
      Due and Payable due to the Borrower’s death; • initiating a Due and Payable
      without a HUD Approval timeline in HERMIT for cases where the HECM is Due and
      Payable due to conveyance; or • completing the Due and Payable timeline in HERMIT
      for cases where the HECM is Due and Payable due to a Deferral Period ending.
      The Mortgagee must take whatever steps are necessary to ensure they are able
      to provide the required notice. Where state privacy laws impair the Mortgagee’s
      ability to acquire relevant information about the death of a Borrower or an
      Eligible NBS, the Mortgagee must: • notify HUD, through HERMIT, of the Due and
      Payable status within 30 Days of the end of the state’s privacy law restriction
      on the Mortgagee’s access to the information; and • provide the relevant state
      law and a detailed explanation supporting the delay. Notification During Deferral
      Periods In the event of a Deferral Period, the Mortgagee must not complete the
      Due and Payable timeline until the Deferral Period ends. The Mortgagee must
      complete the appropriate Due and Payable timeline within 60 Days from the end
      of the Deferral Period, which provides HUD the required notification and changes
      the HECM status in HERMIT to Due and Payable. (D) Verbal Notification of Death
      to Mortgagee When a HECM is Due and Payable as a result of a Borrower’s death
      or a Deferral Period ends as a result of an Eligible NBS’s death, the Mortgagee
      may accept verbal notification of the death from the heirs or estate for Due
      and Payable purposes. III. SERVICING AND LOSS MITIGATION B. Title II Insured
      Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1490
      Last Revised: 11/26/2025 iii. Required Notifications (A) Standard (1) Due and
      Payable Notice to Borrower for Reasons Other than Death The Mortgagee must provide
      notice to the Borrower within 30 Days of receiving HUD’s approval to call a
      HECM Due and Payable. The notice must: • state that an obligation of the Borrower
      has not been met; • state specifically what obligation of the Borrower has not
      been met; • state that failure of the Borrower to comply with the terms of the
      HECM has resulted in the HECM becoming Due and Payable; • provide notice of
      the availability of housing counseling; • provide notice of any available Loss
      Mitigation Options the Mortgagee may offer; and • provide the Borrower 30 Days
      to notify the Mortgagee of their intention to either: • satisfy the HECM in
      full; • sell the Property for at least 95 percent of the current appraised value;
      • provide the Mortgagee with a DIL of Foreclosure; or • correct the matter which
      resulted in the HECM becoming Due and Payable. (2) Due and Payable Notice to
      Borrower’s Estate or Heirs due to Death or End of Deferral Period The Mortgagee
      must provide notice to the Borrower’s estate, heir, or other party with legal
      title to the Property securing the HECM within 30 Days notifying the Commissioner
      that the Mortgage is Due and Payable. The notice must provide the following
      options for the Borrower’s estate, heir, or other party with legal title to
      the Property to resolve the HECM: • pay the outstanding loan balance including
      any accrued interest, MIP, and mortgagee advances in full; • provide information
      to the Mortgagee regarding a spouse of the Borrower who was not also a borrower
      on the HECM to determine if the spouse may be eligible for a Deferral Period;
      • sell the Property for at least the lesser of the outstanding principal balance
      or 95 percent of the current appraised value; • provide the Mortgagee with a
      DIL of Foreclosure; • correct the condition which resulted in the Mortgage becoming
      Due and Payable for reasons other than the death of the last surviving Borrower;
      or • for an Eligible NBS, correct the condition which resulted in an end to
      the Deferral Period. III. SERVICING AND LOSS MITIGATION B. Title II Insured
      Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1491
      Last Revised: 11/26/2025 (3) Notice to Non-Borrowing Spouse at the Start of
      a Deferral Period Within 30 Days of receiving notice of the last surviving Borrower’s
      death, the Mortgagee must provide to an Eligible NBS a notice including information
      on: • the eligibility requirements for a Deferral Period; • the conditions and
      requirements for the continuation of a Deferral Period; • the ability to cure
      the default (due to failure to maintain the Property or failure to pay Property
      Charges) in order to be in compliance with the requirements for the continuation
      of a Deferral Period; and • the ability to reinstate the Deferral Period, which
      may be limited under certain circumstances. (4) Due and Payable Notice to Non-Borrowing
      Spouse at the End of a Deferral Period – Non-Borrowing Spouse Ineligibility
      When a Deferral Period ends because an Eligible NBS has become an Ineligible
      NBS, the Mortgagee must notify the NBS within 30 Days after the end of the Deferral
      Period that: • the Deferral Period has ended; • the HECM is Due and Payable;
      and • the Borrower’s estate, heir, or other party with authority to dispose
      of the Property may either: • satisfy the HECM for the lesser of the full debt
      or 95 percent of the current appraised value; • sell the Property for at least
      the lesser of the outstanding principal balance or 95 percent of the current
      appraised value; or • provide the Mortgagee with a DIL of Foreclosure. (5) Due
      and Payable Notice to Non-Borrowing Spouse at the End of a Deferral Period –
      HECM Ineligibility When a HECM is in a Deferral Period, if any other applicable
      requirements for deferral cease to be met, the Mortgagee must notify the Eligible
      NBS within 30 Days that: • a requirement of the Deferral Period has not been
      met; • the Eligible NBS has 30 Days to cure the condition of noncompliance;
      and • failure to cure within such time will result in the Deferral Period ending
      and the HECM becoming Due and Payable with an explanation of Due and Payable
      status. (B) Required Documentation The Mortgagee must retain copies of all required
      notifications in the Servicing File. III. SERVICING AND LOSS MITIGATION B. Title
      II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook
      4000.1 1492 Last Revised: 11/26/2025 iv. Selling the Property Secured by a HECM
      Under the terms of the HECM, the Borrower may sell the Property secured by a
      HECM at any time for the lesser of the full HECM debt or the current appraised
      value. If the HECM is Due and Payable, the Property may be sold for the lesser
      of the full HECM debt, including any and all expenses incurred in connection
      with the HECM, or 95 percent of the current appraised value. Upon receipt of
      a request from the Borrower or other party with the legal right to dispose of
      the Property, the Mortgagee must have the Property appraised in accordance with
      the Required Appraisals section. The Mortgagee must provide the requestor a
      copy of the appraisal and retain copies in their Servicing File. For the purposes
      of this section, sell includes any post-death transfer of title by operation
      of law. Where the Property is sold for less than full Payoff, the Mortgagee
      may file a Short Sale Claims (Claim Type 23) following the instructions in this
      section. v. Required Inspections (A) Standard When a HECM is in Due and Payable
      status, the Mortgagee must perform a monthly visual inspection of the Property
      securing the HECM to determine whether the Property is vacant. The Mortgagee
      must take reasonable action to protect and preserve the Property securing the
      HECM when it is determined or should have been determined that the Property
      is vacant or abandoned, if such action does not constitute illegal trespass.
      “Reasonable action” includes the commencement of foreclosure within the time
      required in this section. (B) Required Documentation The Mortgagee must retain
      copies of all inspection reports from the initial inspection through the sale
      of the Property in their Servicing File. vi. Required Appraisals (A) Standard
      (1) Appraisal Requested The Mortgagee must have the Property appraised by an
      FHA Roster Appraiser no later than 30 Days after the Borrower, Borrower’s estate,
      heir, or other party with authority to dispose of the Property requests an appraisal
      in connection with a pending sale of the Property. III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing
      Handbook 4000.1 1493 Last Revised: 11/26/2025 • If the HECM is not Due and Payable,
      the appraisal is at the Borrower’s expense. • If the HECM is Due and Payable,
      the appraisal is at the Mortgagee’s expense, but the Mortgagee may be reimbursed
      from the proceeds of any sale or through the claim process. (2) Appraisal for
      Foreclosure Sale The Mortgagee must have the Property appraised before a foreclosure
      sale. The appraisal must have an effective date that is no more than 30 Days
      before the sale. If a foreclosure sale is rescheduled, the Mortgagee may continue
      to use the appraisal obtained for the initial foreclosure sale date provided
      it remains valid and unexpired as of the date of the foreclosure sale. (3) Appraisal
      for Appraisal-Based Claim If the Mortgagee is submitting an appraisal-based
      claim, the Mortgagee must use a valid, unexpired appraisal as of the date of
      claim submission. (B) Required Documentation The Mortgagee must retain copies
      of all appraisals received in the Servicing File.'
  judgment: false
