Upcoming HECM Financial Assessment: Useful to a Degree

An industry call this week provided some insight into progress lenders made by lenders in working with HECM borrowers behind on their taxes and insurance payments, as well as an update on the status of the “financial assessment” the Department of Housing and Urban Development plans to introduce to prevent future occurrences.

During the call, representatives from HUD indicated the Federal Register Notice that is to contain details on the assessment for HECM borrowers has yet to enter departmental clearance. This seems to put it slightly behind schedule based on the latest time frame RMD received from the FHA.

When RMD spoke with FHA’s Deputy Assistant Secretary for Single-Family Housing, Vicki Bott, in early March, Bott indicated the rule was being written and could hit the street within 45-60 days. Once the notice is released, a comment period will follow, Bott told RMD.

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Regarding the financial assessment, Jeff Lewis, chairman of Generation Mortgage said an assessment is useful—to an extent.

“We are anxious to have the tools to prevent future tax and insurance problems. Escrows and Set-asides could be very useful. We would just like to avoid a scenario where to prevent a problem, we overdo the restrictions,” he says.  “If issuers and underwriters were simply given the freedom to financially underwrite as they see fit, the marketplace will reduce the tax and insurance problem without going too far. Issuers have tremendous incentive to keep defaults out of their pools.”

A pilot program introduced earlier this year to work with T&I borrowers has helped to improve response rates according to people on the call.  However, many quesitons remain about how the process should work and the industry is working to develop a standard practice that complies with HUD guidelines.

Written by Elizabeth Ecker

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