§ 206.27 - Mortgage provisions.

§ 206.27 Mortgage provisions.

(a) Form. The mortgage shall be in a form meeting the requirements of the SecretaryCommissioner.

(b) Provisions. The terms of the mortgage shall explain contain an explanation of how payments will be made to the mortgagorborrower, how interest will be charged, and when the mortgage will be due and payable. The mortgage shall include a provision deferring the due and payable status that occurs because of the death of the last surviving borrower for an Eligible Non-Borrowing Spouse. It shall also contain provisions designed to ensure compliance with this part and provisions on the following additional matters:

(1) Payments Disbursements by the mortgagee under the term or tenure payment options shall be mailed to the mortgagor borrower or electronically transferred to an account of the mortgagor borrower on the first business day of each month beginning with the first month after closing. Payments Disbursements under the line of credit payment option shall be mailed to the mortgagor borrower or electronically transferred to an account of the mortgagor borrower within five business days after the mortgagee has received a written request for payment disbursement by the mortgagor. borrower. In accordance with § 206.55, in no event may disbursements continue during a Deferral Period.

(2) The mortgagor shall maintain hazard insurance on the property in an amount acceptable to the Secretary and the mortgageeborrower shall insure all improvements on the property that serves as collateral for the HECM whether in existence at the time of origination or subsequently erected, against any hazards, casualties, and contingencies, including but not limited to fire and flood, for which the mortgagee requires insurance. Such insurance shall be maintained in the amount and for the period of time that is necessary to protect the mortgagee's investment. Whether or not the mortgagee imposes a flood insurance requirement, the borrower shall at a minimum insure all improvements on the property, whether in existence at the time of origination or subsequently erected, against loss by floods to the extent required by the Commissioner. If the mortgagee imposes insurance requirements, all insurance shall be carried with companies acceptable to the mortgagee, and the insurance policies and any renewals shall be held by the mortgagee and shall include loss payable clauses in favor of and in a form acceptable to the mortgagee.

(3) The mortgagor borrower shall not participate in a real estate tax deferral program or permit any liens to be recorded against the property, unless such liens are subordinate to the insured mortgage and, if applicable, any second mortgage held by the SecretaryCommissioner.

(4) A mortgage may be prepaid in full or in part in accordance with § 206.209.

(5) The mortgagor borrower must keep the property in good repair.

(6) The mortgagor must pay taxes, hazard insurance premiums, ground rents and assessments in a timely manner, except to the extent such property charges are paid by the mortgagee borrower must provide for the payment of property charges in accordance with § 206.205.

(7) The mortgagor shall be charged for the payment of monthly MIP may be added to the outstanding principal balance.

(8) The mortgagor borrower shall have no personal liability for payment of the mortgage outstanding loan balance. The mortgagee shall enforce the debt only through sale of the property. The mortgagee shall not be permitted to obtain a deficiency judgment against the mortgagor borrower if the mortgage is foreclosed.

(9) If the mortgage is assigned to the Secretary Commissioner under § 206.121(b), the mortgagor borrower shall not be liable for any difference between the insurance benefits paid to the mortgagee and the mortgage outstanding loan balance including accrued interest, owed by the mortgagor borrower at the time of the assignment.

(10) If State law limits the first lien status of the mortgage as originally executed and recorded to a maximum amount of debt or a maximum number of years, the mortgagor borrower shall agree to execute any additional documents required by the mortgagee and approved by the Secretary Commissioner to extend the first lien status to an additional amount of debt and an additional number of years and to cause any other liens to be removed or subordinated.

(c) Date the mortgage comes due and payable.

(1) The mortgage shall state that the mortgage outstanding loan balance will be due and payable in full if a mortgagor borrower dies and the property is not the principal residence of at least one surviving mortgagor, or a mortgagor conveys all or borrower, except that the due and payable status shall be deferred in accordance with paragraph (c)(3) of this section if the requirements of the Deferral Period are met; or if a borrower conveys all of his or her title in the property and no other mortgagor borrower retains title to the property. For purposes of the preceding sentence, a mortgagor borrower retains title in the property if the mortgagor borrower continues to hold title to any part of the property in fee simple, as a leasehold interest as set forth in § 206.45(a), or as a life estate.

(2) The mortgage shall state that the mortgage outstanding loan balance shall be due and payable in full, upon approval of the SecretaryCommissioner, if any of the following occur:

(i) The property ceases to be the principal residence of a mortgagor borrower for reasons other than death and the property is not the principal residence of at least one other mortgagorborrower;

(ii) For a period of longer than 12 consecutive months, a mortgagor borrower fails to occupy the property because of physical or mental illness and the property is not the principal residence of at least one other mortgagorborrower; or

(iii) The borrower does not provide for the payment of property charges in accordance with § 206.205; or

(iv) An obligation of the

mortgagor

borrower under the mortgage is not performed.

(3) Deferral of due and payable status. The mortgage documents shall contain a provision deferring due and payable status, called the Deferral Period, for an Eligible Non-Borrowing Spouse until the death of the last Eligible Non-Borrowing Spouse or the requirements of the Deferral Period in § 206.55 cease to be met and have not been cured as provided for in § 206.57.

(d) Second mortgage to SecretaryCommissioner. Unless otherwise provided by the SecretaryCommissioner, a second mortgage to secure any payments by the Secretary Commissioner as provided in § 206.121(c) must be given to the Secretary Commissioner before a Mortgage Insurance Certificate is issued for the mortgage.

(Approved by the Office of Management and Budget under control number 2528-0133)

[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42760, Aug. 16, 1995; 61 FR 49033, Sept. 17, 1996]

If the Commissioner does not require a second mortgage to be given to the Commissioner prior to the issuance of a Mortgage Insurance Certificate, the Commissioner may require a second mortgage to be given to the Commissioner at a later day in order to secure payments by the Commissioner as provided in § 206.121(c).