The decision by industry participants and the National Reverse Mortgage Lenders Association to move forward with a financial assessment that will determine a borrower’s ability to meet his or her tax and insurance payments has had a chance to settle in among lenders and other industry players. But a major question remains: What will such an assessment cost? And who will pay for it?
In the initial assessment proposed by NRMLA to HUD officials, the association requested that an underwriting fee be approved for each case number assigned after the implementation of any financial assessment rulemaking. That fee, NRMLA said at the time, should be usual and customary and not to exceed an amount of $500 per case.
But now that NRMLA has taken the reins on the development of the assessment in hopes it will gain industry buy-in prior to HUD’s implementation of a rule, it remains unknown who will bear the additional cost, since NRMLA does not have the authority to raise the HECM origination fee cap, currently set at $6,000 by the Home Economic Recovery Act of 2008 (HERA).
“Even though HUD may require lenders to incur additional underwriting costs in connection with underwriting HECM loans to new financial assessment standards, without a Mortgagee Letter from HUD or changes to HERA by Congress, we will not have authority to charge increased origination fees on HECM loans,” says Bill Trask, executive vice president/general counsel for Security One Lending.
The additional amount is another unknown. Without the assessment itself, it’s hard to determine how much the additional time and work could actually amount to.
“It’s too early to say in terms of the actual cost because we haven’t defined and determined [the assessment],” says Gregg Smith, president and chief operating office of One Reverse Mortgage.” But, he says, “It’s one of those items where it isn’t really a cost. It’s ensuring the option of having this solution for the senior.”
The cost itself is less of an issue, says Jeff Lewis, Generation Mortgage chairman.
“We may have a little bit more underwriting costs, but not any direct fee,” he says. “At the end of the day, if we spend the money, we think there’s a benefit on the other end.”
Written by Elizabeth Ecker