Even though lenders are not currently required to “better” underwrite reverse mortgages and make allowances for property charges, there’s nothing to stop them from doing so, a Department of Housing and Urban Development official told attendees of a recent mortgage regulators conference.
National Mortgage News reporter Lew Sichelman wrote that Karin Hill, director of HUD’s Office of Single Family Program Development, addressed the issue of policy changes that would require reverse mortgage lenders to underwrite the loans for borrowers’ ability to meet tax and insurance payments associated with the loans, stating that lenders are already able to do so under current law.
“There’s nothing wrong with that,” Hill told the conference attendees. “There’s nothing to say they can’t do it now.”
According to Hill, National Mortgage News reported, HUD has concerns about the health of the HECM program and its development of policy changes will address that.
“We really need to be sure (HECM borrowers) understand their obligations, and have sufficient cash flow,” Hill said.
The article noted the recent exits of Bank of America and Wells Fargo from the reverse mortgage business as well as the shift from adjustable rate reverse mortgages to fixed rate loans, which now comprise close to 70% of reverse mortgage borrowers.
“HUD is considering a number of ideas covering a range of issues,” National Mortgage News wrote, based on Hill’s comments. “Among other things, it is looking into requiring lenders to perform a full financial assessment of potential HECM borrowers, giving lenders wider latitude in requiring set-asides for property charges, and giving borrowers the option of allowing lenders to escrow for the taxes and fees.”
Read the National Mortgage News article.
Written by Elizabeth Ecker