HUD Issues Guidance on HECM Advisor Program

image NRMLA recently announced that the U.S. Department of Housing and Urban Development published Mortgagee Letter 2008-14, Home Equity Conversion Mortgage Program – Non FHA Approved Mortgage Brokers, which provides long-awaited guidance on the role of “advisors” in the HECM program.

ML 2008-14 clarifies that “advisors” (referred to as non-approved entities or third parties) cannot be FHA-approved. All non-FHA entities who wish to be”advisors” can provide limited services only, of an educational nature, which may include: educating prospective borrowers about the reverse mortgage lending process, advising the borrower about different types of loan products available, demonstrating how closing costs and payment options could vary under each product, and maintaining regular contact with the lender to keep the borrower apprised of the status of the loan application.

The fee earned by advisors can be no more than the reasonable value for such services. For example, if the payment bears no reasonable relationship to the market value of the services provided, the excess over the market rate may be used as evidence of a compensated referral or unearned fee in violation of section 8(a) or (b) of RESPA and 24 CFR 3500.14.


Does anyone else get frustrated when HUD issues guidelines and they include terms like “reasonable value” for such services? Terms like this are open to interpretation and ask for another mortgagee letter to clarify the meaning.

To review the contents of Mortgagee Letter 2008-14, please click here.

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  • Lots of things are frustrating when dealing with the inert offices of FHA and Hud. I particularly don’t like their response to the issue of high closing costs associated with reverse mortgages. They somehow think that the reduction of the LO fee is the only remedy, but a concurrent reduction of the MIP is also needed. But, NO, let’s not go there, so they keep the 2% limit, and pull the rug out from under the LO’s who do the grunt work of explaining the program and shepherding the client through the process, or that’s the way it should be done. And all this is done with the guidance from NRMLA and AARP? Those two are as helpful as wings on a penguin, they have wings, but they don’t fly. Has anyone in either offices ever sold a loan, ever gone on an application? No, but they think they have all the answers.

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