After more than 20 years in the reverse mortgage industry, I’ve seen plenty of changes to the Home Equity Conversion Mortgage program, but nothing like what’s been going on these past few months. Starting in September 2013, product specs got a facelift, including changes to the principal limit factors and a limit to the first-year draw. In June 2014, HUD made changes that directly impacted the fixed-rate product. This was followed up by the non-borrowing spouse guidelines, effective August 4, 2014. We all anticipate additional changes surrounding Financial Assessment.
A change to product specs may seem basic on the surface, but there is a huge amount of behind-the-scenes work to be done to account for all the changes, often with a small window of time for implementation. Companies providing loan origination and servicing systems must update principal limit factors and related calculations, add system features and fields to accommodate new requirements, and perhaps the most intricate: accommodate all the differences based upon the date the case number was assigned.
For the first time in 20 years, Bay Docs and other document providers have to maintain multiple versions of documentation to reflect the proper compliant language dependent upon the case number assignment date. We’ve had to become very educated about all the program changes and how the changes impact the document packages.
Education is always tantamount to the success of any change within the industry. Lenders and originators must educate every layer of their staff. Loan officers have to be knowledgeable to then convey the proper message to borrowers. Education doesn’t stop there: Given all the changes to the program over the past year, HUD must also educate its team to know what to look for when reviewing files to endorse.
Did you know that starting with case numbers assigned on or after June 25, 2014, the fixed-rate HECM program eliminated the second security instrument and the second note? HUD also removed the requirement to have someone at HUD sign the loan agreement. Our office was flooded with phone calls looking for these documents. HOCs have even rejected submitted files for endorsement because these items were not included.
HUD has provided guidance and educational tools via their mortgagee letters and revised model forms. Yet we all must do our part to continue to educate all the players in our industry. This will help eliminate time-consuming processes and unnecessary follow-up. Remaining compliant in the midst of all these changes is imperative to everyone’s success.
