source:
  type: guide
  id: hud-4000-1-iii-e-borrower-disbursements
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Borrower
    Disbursements (04/29/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Borrower
    Disbursements (04/29/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-e-borrower-disbursements-full
  canonical_id: hud-4000-1-iii-e-borrower-disbursements-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Borrower
    Disbursements (04/29/2024)
  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 — e. Borrower
      Disbursements (04/29/2024)
    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: 'e. Borrower Disbursements (04/29/2024) i. Definition Borrower
      Disbursements are all disbursements made to a Borrower from available HECM funds.
      ii. Standard Mortgagees must make all payments to the Borrower according to
      the current payment plan so long as the HECM is not Due and Payable subject
      to the Initial Disbursement Limit. iii. Payment Plans (A) Tenure Payment Option
      The tenure payment option is available for adjustable rate HECMs. The Borrower
      receives fixed monthly payments so long as the HECM is not prepaid in full or
      becomes Due and Payable, or the payments do not exceed any maximum mortgage
      amount stated in the security instrument or would otherwise exceed the amount
      secured, even if the payments exceed the Borrower’s available Principal Limit.
      (B) Term Payment Option The term payment option is available for adjustable
      rate HECMs. The Borrower receives equal monthly payments for a term of months
      so long as the HECM is not prepaid in full or becomes Due and Payable, or the
      payments do not exceed any maximum mortgage amount stated in the security instrument
      or would otherwise exceed the amount secured by the first HECM lien, even if
      the payments exceed the Borrower’s available Principal Limit. (C) Line of Credit
      Payment Option The line of credit payment option is available for adjustable
      rate HECMs. The Borrower receives unscheduled payments at times and in amounts
      of the Borrower’s choosing. (D) Modified Tenure Payment Option The modified
      tenure payment option is available for adjustable rate HECMs. The Borrower must
      set aside a portion of the Principal Limit as a line of credit from which to
      draw at times and in amounts of their choosing, and receives the rest in equal
      monthly payments so long as the HECM is not prepaid in full or becomes Due and
      Payable, or the payments do not exceed any maximum mortgage amount stated in
      the security instrument or would otherwise exceed the amount secured by the
      first HECM lien. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing
      Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs Handbook 4000.1
      1447 Last Revised: 11/26/2025 (E) Modified Term Payment Option The modified
      term payment option is available for adjustable rate HECMs. The Borrower must
      set aside a portion of the Principal Limit as a line of credit from which to
      draw at times and in amounts of their choosing and receives the rest in equal
      monthly payments for a term of months selected by the Borrower. (F) Single Lump
      Sum Payment Option The single lump sum payment option is only available for
      fixed rate HECMs. The Borrower receives a single Disbursement at closing. After
      closing, the Mortgagee must not disburse HECM proceeds to the Borrower, except
      from a Set-Aside established at closing. iv. Payment Plan Changes (A) Voluntary
      Payment Plan Changes The Borrower can request to change the payment plan at
      any time during the life of the HECM, unless the Borrower chose a lump sum payment
      plan at closing. The Mortgagee may charge a fee, not to exceed $20.00, for changing
      the Borrower’s payment plan. (1) Standard The Mortgagee must send the Borrower
      a written explanation of the terms, including the option for the Borrower to
      sign and return the new payment plan, within five business days of receipt of
      the Borrower’s request for a new payment plan. The Mortgagee must complete the
      payment plan change within five business days of receipt of the new signed payment
      plan from the Borrower. (2) Required Documentation The Mortgagee must retain
      copies of the written explanation sent to the Borrower and the signed payment
      plan received from the Borrower in the Servicing File for the HECM. (B) Required
      Payment Plan Changes The Mortgagee must change a Borrower’s payment plan when:
      • a Borrower with a term or tenure payment plan has funds remaining in a Repair
      Set-Aside after all repairs are completed and paid in full; • payments that
      have been suspended for more than six months resume; or • the Borrower has failed
      to make a required property charge payment before the due date and the Borrower
      does not have sufficient available funds in an existing line of credit to pay
      the expense, but does have funds available if monthly payments are converted
      to a line of credit. III. SERVICING AND LOSS MITIGATION B. Title II Insured
      Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs Handbook
      4000.1 1448 Last Revised: 11/26/2025 (1) Definition Property Charges refer to
      obligations of the Borrower that include: • property taxes; • Hazard Insurance
      premiums; • applicable Flood Insurance premiums; • Ground Rents; • Homeowners’
      Association (HOA)/Condominium Fees; • Planned Unit Development (PUD) fees; and
      • other special assessments that may be levied by municipalities or state law.
      (2) Standard When a payment plan change is required, the Mortgagee must modify
      the Borrower’s payment plan and provide written notice to the Borrower of the
      new payment plan and the reason for the payment plan change within five business
      days of the payment plan change. (3) Required Documentation Mortgagees must
      keep documentation of the reason for the payment plan change and the notice
      provided to the Borrower in the Servicing File. v. Late Charges (A) Standard
      The Mortgagee must pay a Late Charge and interest to the Borrower for any scheduled
      disbursement made after the first business day of the month or any line of credit
      payment made more than five business days after the receipt of request for disbursement
      as follows: For HECMs with case numbers assigned before September 19, 2017:
      • 10 percent of the amount of the payment due to the Borrower; and • interest
      at the daily HECM Note interest rate on the late payment for each Day the payment
      is late, the total of which shall not exceed $500. For HECMs with case numbers
      assigned on or after September 19, 2017: • 10 percent of the amount of the payment
      due to the Borrower, not to exceed $500 on a single late payment; and • interest
      at the daily HECM Note interest rate on the late payment for each Day the payment
      is late. If the HECM has an adjustable interest rate, the rate in effect when
      the Late Charge first begins to accrue must be used. III. SERVICING AND LOSS
      MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing
      of FHA-Insured HECMs Handbook 4000.1 1449 Last Revised: 11/26/2025 For each
      additional day that the Borrower does not receive payment, the Mortgagee shall
      pay interest at the mortgage interest rate on the late payment. The Mortgagee
      must pay any Late Charges and interest from Mortgagee funds and must not add
      them to the outstanding HECM balance. (B) Required Documentation The Mortgagee
      must include documentation of the Late Charges and interest paid to the Borrower
      in the Servicing File. This must include the amount of the Late Charge and interest
      paid, the date that the payment was made, and evidence of the method by which
      the payment to the Borrower was made. vi. Initial Disbursement Limit Monitoring
      and Tracking Disbursements During the First 12-Month Disbursement Period, the
      Mortgagee must monitor and track all Disbursements to ensure that the total
      of all Disbursements does not exceed the Initial Disbursement Limit. vii. Required
      Documentation The Mortgagee must: • maintain a transaction history that includes
      the amount and date of each Disbursement; • upload all transactions to HERMIT
      by the last Day of the month; and • retain copies of all written requests for
      funds in the Servicing File including the date the request was received. viii.
      Mortgagee Unable or Unwilling to make Required Borrower Payments When the Commissioner
      determines the Mortgagee is unable or unwilling to make payments to a Borrower
      owed under the HECM, the Mortgagee must ensure the following information is
      provided and accurate in the Home Equity Reverse Mortgage Information Technology
      (HERMIT) system: • FHA case number; • payment plan type; • disbursement type
      (scheduled or unscheduled); • payment amount; • payment method – check or Automated
      Clearing House (ACH) transfer; and • bank routing number and account number
      for ACH transfers. A Mortgagee must provide the above referenced information
      to the HERMIT system via the HERMIT Secure File Transfer Protocol (SFTP) Server
      no later than one business day following the date the Borrower payment should
      have been made. This information must be provided in an Excel spreadsheet or
      Comma Separated Values (.csv) file. The Mortgagee III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured
      HECMs Handbook 4000.1 1450 Last Revised: 11/26/2025 must also send an email
      to servicingsupport@hermitsp.com and answers@hud.gov notifying all parties that
      a file has been uploaded. Mortgagees must not send the file directly through
      email. In the event this process needs to be initiated and a Mortgagee does
      not know how to access the HERMIT SFTP site, please contact servicingsupport@hermitsp.com
      for instructions.'
  judgment: false
