A long awaited HECM financial assessment that would apply to borrowers is still pending the development of Federal Housing Administration staff, but the Department of Housing and Urban Development told RMD this week that the assessment progress is moving forward.
“FHA HECM staff have been holding meetings with industry partners and pursuing research on varying financial assessment tools and ideas,” a HUD representative said in an email to RMD.
The National Reverse Mortgage Lenders Association has taken part in meetings with HUD to provide industry feedback and policy guidance on the assessment, which Vicki Bott told RMD in March would likely consider income and assets, rather than a traditional credit requirement.
NRMLA has delivered recommended regulation changes that would be required for the enactment of any financial assessment, said Steve Irwin, NRMLA’s executive vice president.
“Currently, the way the regulations read, you can’t do a financial assessment and there is no option available to a lender to limit the payment plan options that might be available to a borrower or the option of requiring a setaside for taxes and insurance,” Irwin told RMD. “The initial steps are that recommendation and pointing out specific regulations that need to be amended and possible additions to be made.”
The financial assessment has been under discussion for several months, with industry speculation and concern as to what it might entail. Concern over the inclusion of a credit score that could potentially rule out some borrowers has been a concern, as has the potential for an assessment that is too tough, again possibly ruling borrowers out.
When RMD spoke with Bott in early March, she estimated the rule could hit the street within 45 to 60 days. Now, at about two months later, the rule could take several more weeks—or months, to develop.
“It’s a very, very complicated issue,” Irwin said. “NRMLA is suporting a cautious approach because we want to ensure that no deserving borrower is denied access to credit.” NRMLA plans to meet again with HUD, as well as conduct working group meetings on the topic with industry participants in order to more fully design what a financial assessment would look like. Under discussion are the ongoing obligations that a HECM borrower must meet, which ones should be considered, and data sources that can be examined to reveal the typical ongoing obligations for HECM borrowers, according to Irwin.
“We know that it’s a priority of Deputy Assistant Bott, and Acting Assistant [Bob] Ryan. it’s coming. We certainly appreciate the cooperation and willingness to dialogue with industry subject matter experts so we get it right,” Irwin said. “it’s not a simple ratio that is cut and dried. There are compensating factors on the income side and on the debt side that have to be carefully considered.”
“While taking longer than originally estimated,” HUD said, “FHA feels the extra time taken will ultimately result in a more beneficial product for use in this critical program for seniors. At this time we do not have a revised timeline, but the project is moving forward.”
Written by Elizabeth Ecker