Financial Assessment for Reverse Mortgage Borrowers?

“It’s coming,” said Joe Demarkey, Assistant Vice President of Strategic Business Development for MetLife in response to a question about whether the US Department of Housing and Urban Development (HUD) would start requiring lenders perform a credit underwrite for reverse mortgage borrowers.

The first step towards a type of underwrite will be through new HECM counseling protocols which are expected to be released in the near future. Included in the protocols will be a new financial interview tool (FIT) that counselors must utilize to help a prospective borrower asses the financial viability of remaining in their home.

According to a panel at the National Reverse Mortgage Lenders Association (NRMLA) Road Show in Atlanta, the second step will require that lenders conduct a financial assessment of borrowers to ensure they have ability to meet the financial obligations of the HECM. (ie. taxes and insurance). If necessary, the lender may require the borrower to set up an additional set aside to ensure they can meet those obligations.

Peter Bell, President of NRMLA made it clear to the audience that “this is not a financial underwrite”. Stressing that HUD wants to make sure the HECM isn’t a “stop gap measure” for borrowers and to ensure that it’s a solution that will help them in the long run said Bell.

While no one is sure exactly how many HECMs are currently in default due to failure to pay taxes and insurance, Jeff Lewis, Chairman of Generation Mortgage said, “Solving this issue is a big problem for us to promote the program”.

Later during the conference, Daniel Rogers, Director of HUD’s Atlanta Home Ownership Center said the change is currently in departmental clearance. He added that getting it through clearance can take “months or years”.

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