HUD To Delay Reverse Mortgage Financial Assessment Date

The Department of Housing and Urban Development (HUD) has announced today its decision to delay implementation of the long-heralded Financial Assessment rule just weeks before its effective date.

Citing a delay in the delivery of “certain system enhancements” required to support policies published in Mortgagee Letters 2014-21 and 2014-22, HUD said in an email notice to lenders that the Federal Housing Administration (FHA) will publish a Mortgagee Letter in the coming weeks announcing a new effective date for the policies detailed in those letters.

The new effective date is expected to be within 30 to 60 days of the original March 2, 2015 effective date announced in those previous Mortgagee Letters.

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Additionally, HUD also announced that is has revised Home Equity Conversion Mortgage (HECM) model loan documents that incorporate requirements from ML 2014-21 and 2015-02 pertaining to the Life Expectancy Set-Aside; revised eligible and ineligible non-borrowing spouse certifications; and reinstatement of the period of deferral of the due and payable status for an eligible non-borrowing spouse.

A regulation that has been years in the making, the highly anticipated Financial Assessment has assumed a central focus in lenders’ training programs since HUD finally issued the rule back in November.

If history has any way to shape the present, then the delay from HUD was not unlikely.

At an industry conference in November 2013, then-FHA Assistant Secretary Carol Galante told attendees it would grant an extension period of the long-awaited Financial Assessment past its previous January 13, 2014 implementation date.

“We have thrown a lot at you in a short period of time,” Galante said during the event. “We threw a lot at ourselves. But this was necessary to get a program that will be stable from a budgetary perspective. We had to make these changes before the start of the fiscal year.”

A month later, FHA delayed the rule altogether without an indication for when the actual rule would take effect, only that it would issue new guidance no sooner than 90 days from the date of the new Mortgagee Letter that would detail the Financial Assessment.

Fast forward to May 2014 at the National Reverse Mortgage Lenders Association’s Western Regional conference in San Diego, when HUD Director of Single Family Program Development Karin Hill revealed that the agency was making progress on a new Mortgagee Letter for the Financial Assessment, which was likely to arrive by early summer.

In November, Mortgagee Letter 2014-22 finally arrived, effective for HECMs assigned on or after March 2, 2015, thus sending lenders’ training preparations in motion as they rushed to coach their teams for the landmark change that would seemingly appear in a matter of three months.

But now that the Financial Assessment has been delayed again, lenders are afforded more time to train their personnel after what hopefully will be the final tease.

Written by Jason Oliva

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  • Many will see this as an act of mercy by HUD; however, when it comes to our prospects it will seem more like mind games coming directly from us, the originators.

  • Whatever else happened, government remained in control of our futures and utilized this tool to stay in charge as they continue to dangle the FA poison over our drinks. Yes. No. Maybe. Maybe not. That pretty well sums it up.

  • Me again for one more comment on this new twist! What happened, Personally I feel FHA/HUD had not done their home work like they should have.

    I also feel the CFPB interfered by creating a lot of pressure on HUD to make decisions they did not want to make.

    The FA ruling was partially a creation of the fear of an abundance amount of foreclosures coming down the pike because of borrowers not paying their T&I as well as other property charges.

    I suggested a long time ago to set up an escrow account where the borrower could make monthly payments into an account to pay these property charges when do.

    Seniors can handle monthly payments but have a hard time getting hit with large expenses all at once, such as the property charges that come annually!

    My suggestion was ruled out very quickly. Now you have the Life Expectancy Set Aside (LESA) fee, what do you call that?

    If you have a full LESA the servicer will have to make the property charge payments, right?

    I could go on and on but why frustrate myself or others any more. It is plain and simple, we have to much Federal Government interference in every part of our walk in life! It must stop but how?

    Who knows what HUD will come up with now, especially after they review all they have done thus far. What about all the educational courses we have all been taking, what changes to what we have learned up to this point will take place?

    Time will tell???

    John A. Smaldone

    • John,

      The argument about HUD wants financial assessment is old and terribly, terribly wrong. But let us consider two lenders who have left the industry. MetLife wanted financial assessment so badly it tried to go it alone hoping to bring the rest of us along with them. When it failed the executive management of MetLife soon terminated all HECM origination operations.

      The following is the only public reason given by Wells Fargo itself for leaving the industry. Read the words of Mr. Franklin Codel an EVP and the head of mortgage production at Wells Fargo and then attack HUD for financial assessment. All lenders who are on the hook for property service defaults and on the hook for being the lender of record on any related foreclosures has demanded financial assessment. So here are the words of the NYT and a direct statement from Mr. Codel:

      “For Wells Fargo, however, the inability to assess borrowers’ financial health was the biggest factor for exiting the business. Anyone over the age of 62 with enough home equity can take out a reverse mortgage, regardless of their other income. The amount of money received is determined by the borrower’s age, the amount of equity in the home and prevailing interest rates.

      ‘We are not allowed, as an originator, to decline anyone,’ added Mr. Codel of Wells Fargo. We ‘worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.’

      The quotations are taken from a June 17, 2011 article in the New York Times written by Tara Siegel Bernard and titled “2 Big Banks Exit Reverse Mortgage Business.” You will find it at:

      http://www.nytimes.com/2011/06/18/your-money/mortgages/18reverse.html?_r=0

      (The opinions expressed in this reply are not necessarily those of RMS or its affiliates.)

    • John,

      How so many in the industry are willing to blame HUD for something HECM Mortgagees have been calling for since 2009 is hard to say but it does not line up with the facts.

      First we know why Wells Fargo left the industry as represented by Mr. Franklin Codel, a Wells Fargo EVP and head of its mortgage production in a New York Times article as follows:

      “For Wells Fargo, however, the inability to assess borrowers’ financial health was the biggest factor for exiting the business. Anyone over the age of 62 with enough home equity can take out a reverse mortgage, regardless of their other income. The amount of money received is determined by the borrower’s age, the amount of equity in the home and prevailing interest rates.

      ‘We are not allowed, as an originator, to decline anyone,’ added Mr. Codel of Wells Fargo. We ‘worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.’

      The quotations are taken from a June 17, 2011 article in the New York Times written by Tara Siegel Bernard and titled “2 Big Banks Exit Reverse Mortgage Business.” You will find it at:http://www.nytimes.com/2011/06/18/your-money/mortgages/18reverse.html?_r=0

      We all know how MetLife went for broke with lender financial assessment because HUD would not provide lender financial assessment quickly enough and then shortly after the failure of not being able to bring along the rest of the industry, the executive management of its parent corporation shut down all MetLife HECM origination operations. Some wonder if the lack of HUD mandated lender financial assessment was not a significant reason for Bank of America abandoning its origination operations shortly before Wells Fargo did the same.

      (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

    • John,

      In looking over your rejected proposal, you make no reference as to how a borrower becomes a participant. If participation is voluntary, it is highly unlikely if a significant percentage of those who would default will participate thus making the whole reason for having an escrow option all but meaningless. The system as proposed is so loose as proposed that it would take years to determine if it even works.

      Even if every potential defaulter signed up for this system, how would this system reduce defaults when money is at a premium or if the home was underwater? LESAs provide the means to avoid default. So while I doubt the need for the current lender financial assessment after the elimination of Standards and the institution of the first year disbursements limitation, due to lender demand, I do not oppose its implementation whenever HUD decides it is time to release it.

      While there is no question about your sincerity, one has to question the practicality of escrow accounts without any evidence. A much more practical goal would be to support a period of time less than the TALC life expectancy of the youngest borrower when it comes to computing a LESA.

      The hardest are those who are less than 75 but even 12 years seems far too long since the life of the average HECM currently is about 8 years. So as to LESAs why not make the number of months to be funded be 12 times the lower of 1) the TALC life expectancy of the youngest borrower or 2) 8 years.

    • frrllc,

      Sounds like you should be writing the legislation or financially supporting those who can. But what you support will never get through Congress because of its costs to taxpayers and the fact it is helping a segment of seniors retain a substantial asset while the senior homeless go without.

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