The Department of Housing and Urban Development has informed reverse mortgage housing counselors that lenders may begin to implement a new assessment as part of loan underwriting that will help ensure borrowers can meet the tax and insurance obligations associated with their loans.
The notification comes following the release of new recommended underwriting guidance set forth by the National Reverse Mortgage Lenders Association during the association’s annual conference in Boston last week.
Noting an October 5 e-mail from Federal Housing Administration Acting Commissioner Carol Galante that stated HECM lenders may implement financial assessment criteria as part of the qualification for a HECM loan prior to FHA publication of its own regulations, the e-mail informed counselors of their role in the implementation of such an assessment.
“Because a financial assessment is a new part of the HECM loan origination process, it will be critical for HECM counselors to address the likelihood that these requirements may vary among lenders,” the e-mail states.
The e-mail reminds counselors that housing counseling agencies are not permitted to promote, represent, recommend or steer a client to any specific lender. It does direct counselors, however, as to how they must advise clients on the assessment including two important points.
First, that “financial and credit capacity assessment guidelines may differ from lender to lender just as lenders may offer different pricing options and different product options.” Second, “some lenders my implement ‘underwriting requirements’ for HECM applicants and some may not.”
NRMLA’s guidance was published for its members on its website last week and was announced by NRMLA counsel at the association’s national convention. NRLMA encouraged, but did not require, lenders to implement such guidance as soon as possible.
Written by Elizabeth Ecker
