Attention: Reverse Mortgage Lenders & Senior Homeowners – There is a Delay in the Roll-Out of HUD’s HECM Financial Assessment Requirements – Originate Your Reverse Mortgage Now!
HUD’s long-awaited changes to their Home Equity Conversion Mortgage (HECM) underwriting requirements have been officially delayed.
Due to an increasing number of tax and hazard insurance defaults by HECM mortgagors, HUD had drafted a rather comprehensive set of instructions and procedures for lenders to follow in analyzing a prospective HECM Borrower’s financial capacity and willingness to comply with mortgage provisions. In this regard, lenders will be required to complete a Financial Assessment of all prospective HECM Borrowers prior to loan approval in accordance with instructions contained in Mortgagee Letter 2014-22.
These new requirements were originally scheduled to be effective for HECM loan transactions that obtain their FHA case number on or after March 2, 2015. However, in an FHA News Update dated February 12, 2015 (FHA Info #15-14), it is stated that
“Due to a delay in delivery of certain system enhancements required to support the policies published in Mortgagee Letters 2014-21 and 2014-22, in the coming weeks the federal Housing Administration (FHA) will publish a Mortgagee Letter announcing a new effective date for the policies announced in those Mortgagee Letters.”
It is further stated that the new effective date should be within 60 days of the March 2, 2015 initial target date. That should provide active HECM lenders more time to fully digest the new Financial Assessment criteria in determining if prospective HECM borrowers will qualify for this type of financing. These lenders will no longer be able to advertise that a senior homeowner can obtain an FHA insured reverse mortgage with no real credit underwriting reviews.
Let’s hope that active HECM lenders do not find these new requirements too onerous and decide to cease originating reverse mortgages. This program, where the youngest borrower must be at least 62 years old, has proven to be a viable “age-in-place” option for many seniors and with more and more baby boomers becoming eligible for this type of financing needs to remain readily available.