After much delay, HUD has released new guidance for reverse mortgages
The Department of Housing and Urban Development (HUD) has issued the long-delayed HECM (Home Equity Conversion Mortgage) Financial Assessment and Property Charge Guide this morning. The assessment for reverse mortgage borrowers becomes effective for all case numbers issued on or after March 2, 2015.
As explained in its Mortgagee Letter 2014-22, the guidance requires that lenders consider both a borrower’s willingness and capacity to pay his or her loan obligations, including tax and insurance associated with the property.
“The mortgagee must evaluate the mortgagor’s willingness and capacity to timely meet his or her financial obligations and to comply with the mortgage requirements,” HUD stated in the financial assessment. “In conducting this financial assessment, mortgagees must take into consideration that some mortgagors seek a HECM due to financial difficulties, which may be reflected in the mortgagor’s credit report and/or property charge payment history. The mortgagee must also consider to what extent the proceeds of the HECM could provide a solution to any such financial difficulties.”
The mortgage-e letter also states what documents are needed for all reverse mortgage borrowers. Documentation includes credit history documentation, income verification, asset verification, property charge verification, residual income analysis, documentation of extenuating circumstances or compensating factors, and calculations for life expectancy set-asides and residual income shortfall set-asides.
The news came minutes after the National Reverse Mortgage Lenders Association (NRMLA)wrapped up a three-hour long session about federal financial assessments guidelines during its 2014 conference in Miami. “I’m the biggest fan and cheerleader of HUD, but wouldn’t it figure they would come out with guidelines 30 minutes after our three-long session about mortgagee letters,” said Peter Bell, president and CEO of NRMLA. “It is good news; HUD has provided an answer for us.”
Bell noted that the last session at this year’s NRMLA will be dedicated to analyzing the new assessment.
Mortgagee Letters are issued occasionally to clarify policies, set up new rules or prepare borrowers and lenders for changes in the Federal Housing Administration (FHA) program as dictated by law or other means. Earlier this year, HUD issued two new FHA mortagee letters that included limitations to fixed interest rate HECM loans.
As explained in its Mortgagee Letter 2014-22, the guidance requires that lenders consider both a borrower’s willingness and capacity to pay his or her loan obligations, including tax and insurance associated with the property.
“The mortgagee must evaluate the mortgagor’s willingness and capacity to timely meet his or her financial obligations and to comply with the mortgage requirements,” HUD stated in the financial assessment. “In conducting this financial assessment, mortgagees must take into consideration that some mortgagors seek a HECM due to financial difficulties, which may be reflected in the mortgagor’s credit report and/or property charge payment history. The mortgagee must also consider to what extent the proceeds of the HECM could provide a solution to any such financial difficulties.”
The mortgage-e letter also states what documents are needed for all reverse mortgage borrowers. Documentation includes credit history documentation, income verification, asset verification, property charge verification, residual income analysis, documentation of extenuating circumstances or compensating factors, and calculations for life expectancy set-asides and residual income shortfall set-asides.
The news came minutes after the National Reverse Mortgage Lenders Association (NRMLA)wrapped up a three-hour long session about federal financial assessments guidelines during its 2014 conference in Miami. “I’m the biggest fan and cheerleader of HUD, but wouldn’t it figure they would come out with guidelines 30 minutes after our three-long session about mortgagee letters,” said Peter Bell, president and CEO of NRMLA. “It is good news; HUD has provided an answer for us.”
Bell noted that the last session at this year’s NRMLA will be dedicated to analyzing the new assessment.
Mortgagee Letters are issued occasionally to clarify policies, set up new rules or prepare borrowers and lenders for changes in the Federal Housing Administration (FHA) program as dictated by law or other means. Earlier this year, HUD issued two new FHA mortagee letters that included limitations to fixed interest rate HECM loans.
