HUD Sets New Reverse Mortgage Financial Assessment Date

Two weeks following its recent delay earlier this month, the Department of Housing and Urban Development (HUD) today released the new effective date for the reverse mortgage Financial Assessment.

Previously expected to arrive within 30 to 60 days of the original March 2, 2015 effective date, Mortgagee Letter 2015-06 issued today states that the new effective date for Home Equity Conversion Mortgages (HECMs) to comply with the Financial Assessment guidelines will be for case numbers issued on or after April 27, 2015.

In justifying its decision to push back the implementation date, HUD cited two weeks ago a “delay in the delivery of certain system enhancements required to support the policies published in Mortgagee Letters 2014-21 and 2014-22.”

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Now afforded an extra month to prepare for the upcoming program changes, lenders have already undertaken a variety of strategies and initiatives in their training programs as they anticipated the original March 2 effective date. 

Written by Jason Oliva

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      • I suspect Tim is referring to the fact that the ‘poorer’ are subject to a minimum $2,500 origination base while someone ‘richer’ with a $800,000 home sees their origination fee maxed at $6,000. On a percentage basis, the ‘rich’ win. Adding this assessment will be more likely to result in a set aside for a ‘poorer’ person than it will for a ‘richer’ person who can easily pay their taxes and insurance.

      • Jim,

        Yet you make the opposite case.

        What are the actual Principal Limit Factors when the home is worth $800,000? For example if the Principal Limit Factor is 54%, then the Principal Limit will be $337,770 which is only 42.2% of the $800,000 value but all the fees are the same for homes over $625,500 as those with a $625,500 value even though the lending limit effectively reduces the actual Principal Limit Factor that the higher valued home borrower will experience. So based on your illustration the “poorer” senior is paying proportionately more because they are getting proportionately more based on the value of their homes.

  • with an ounce of luck FHA will heed the words of Johnny Mathis and set the date for the rollout to, “The Twelfth of Never” Hud’s problems with this subjective failure of reasoning is just beginning regardless of the technology “enhancements” they are counting on…there is no substitute for common sense. Maybe later…..ha ha

  • I am glad to see this publication repeating this announcement by HUD, I feel The Reverse Mortgage Daily Post is not taking any chances of missing anyone and is doing our industry a great service. My appreciation extended to you John and your staff!

    John A. Smaldone

  • Where are the voices who told us again and again to quit complaining about financial assessment since it IS here. These Don Quixotes need to mind their own business. They are not HUD nor are they authorized by HUD. If they think they are representing NRMLA, when it comes to deciding Mortgagee Letter implementation dates, what is NRMLA? Most of them were “wanna bes.”

    Is this one of a series of delays or is this a final final implementation date?

    It is time to raise our voices to ask HUD to put financial assessment on indefinite hold. The IMMENSE collateral damage that financial assessment is potentially capable of since the changes of Mortgagee Letters 2013-27 and 2014-12 is all of the reason HUD needs to delay financial assessment for another few years until the data can be gathered and analyzed to determine if financial assessment is even needed and if it is, should the present financial assessment be toned down?

  • Our concern should be keeping seniors in their homes so they can “age in place”. Isn’t that WHY the Reverse Mortgage program was instituted in the first place? Unless we who serve our senior community can see the data — if the foreclosure rate for Reverses was really that bad, then this should be delayed. It will scare off potential Reverse borrowers as we saw from other HUD changes that took place in recent years. If the government can waste all the money they do, give money to countries who HATE us, spend money on useless things, then I believe NO senior should ever be foreclosed on. There is well enough money in this country to take care of every senior who has served this country well — or do we not believe in the Greatest Generation? I hope the outcry is so great HUD cancels this thing for GOOD.

    • Kathie,

      While I agree with your description of the need for a strong reconsideration of when financial assessment may be needed based on the changes of September 30, 2013 and August 4, 2014, I disagree with your proposition that no senior should be foreclosed on. Some of us reject the notion that the purpose of the HECM program was so that seniors can age in place.

      Aging in place is not the purpose of the law as codified at 12 USC 1715z-20(a). Some claim it is the premise or the principal assumption but cannot demonstrate it by any Congressional or HUD governing documents.

      Aging in place is a wonderful byproduct for some. Yet most HECMs terminate within 8 years from closing. So substantial numbers of seniors move AFTER getting a HECM. A HECM means for many of these folks 8 years of less stress over financial matters.

      For some a HECM is not the means for aging place but it is what traps them in their current home. The reason is their home values are just returning close to what they were when they got their HECM but in many cases they got a fixed rate Standard, so their equity is not even close to where their amortization schedules showed it would be at this point in the loan even though their loan balances are. In fact some are underwater or soon will be. This means their equity will not provide a sufficient down payment for another (and perhaps now more suitable) home.

      I am not so sure why originators love the aging in place dream so much when in fact the reality is much different for many borrowers. Its place in our history is not as a fundamental principle of the structure of the HECM program.

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