Mortgage

FHA takes steps to streamline reverse mortgage underwriting

Releases specific guidance on the contracting of third parties to verify financial info

In 2014, the Federal Housing Administration released updated guidelines for underwriting reverse mortgage loans, instituting a financial assessment of prospective borrowers that required a much deeper dive into a borrower’s credit history than previously required.

The goal was to reduce the likelihood of default by assessing a borrower’s financial status and history to determine their “ability and willingness” to fulfill the obligations of the loan.

The result was a long and time-consuming endeavor for HECM processors and underwriters.

But now, the FHA has taken steps to streamline the cumbersome process for lenders, releasing updated guidance recently that specifically approves the use of third-party verification – or TPV – to collect a borrower’s financial information.

In a new mortgagee letter, the FHA said TPV services provide lenders with an alternative means to verify a borrower’s income, assets and employment so they do not have to collect paystubs, W-2s and bank statements themselves.

While previous FHA guidance allowed for the electronic verification of financial documents, no specific guidance regarding the use of the TPV vendors who specialize in this type of information gathering had been released.

Now, lenders are expressly permitted to hire TPV vendors and specific requirements – including the lender’s responsibility to ensure their compliance – have been detailed.

You can read the details in the mortgagee letter here.

About the Author

Most Popular Articles

Housing market flashing recession signal

The housing market is signaling there will be an economic recession by the 2020 election, according to Benn Steil, director of international economics at the Council on Foreign Relations. “When income fails to keep pace with home prices, the latter must fall back,” the post said. “Falling home prices, in turn, drive down household spending.”

Oct 11, 2019 By

Latest Articles

CoreLogic: California home sales see worst August in 4 years

Last month, the California Association of Realtors predicted a slow down for the state’s housing market in 2020. According to a recent report by CoreLogic, cooling home sales are already here. In fact, August marked the fewest home sales for that month in four years.

Oct 14, 2019 By