In advance of the implementation of a financial assessment for reverse mortgage borrowers slated to take place in January 2014, the National Reverse Mortgage Lenders Association is seeking clarification on the assessment.
In comments made to the Federal Housing Administration in response to a public comment request, NRMLA sought more information on a number of topics relating to the new borrower assessment, that will account for willingness and capacity to pay property charges including property tax and homeowners insurance payments.
“It’s a highly complex topic that revolves around capacity, willingness, and compensating factors to determine whether set-asides are necessary,” NRMLA wrote in a notice to members on Friday.
The comments focus on six topics including the need to take into account HECM proceeds in the dissipation equation; the need to remove any discounting of assets; the need to make Life Time Expectancy Set Asides a requirement only if the applicant fails Capacity AND Willingness; the need to grant borrowers the ability to retire unsecured debt at time of closing and incorporate the reduced debt service in the Capacity calculations; the lack of minimum standards for the Willingness test; and the lack of any quantitative guidance regarding the “borrower authorization” to pay their property charges from the monthly payment or line of credit.
NRMLA cited an example of a situation with a non-borrowing spouse whose income cannot be considered under the proposed financial assessment in its cash flow analysis. However, NRMLA comments, in its view, all of the household income should be considered.
The new rule is scheduled to take effect January 13, 2014.
Written by Elizabeth Ecker