FHA Resolves Tech Hang-Ups with Reverse Mortgage Financial Assessment

The Federal Housing Administration (FHA) has identified an edit in the FHA Connection system that will allow reverse mortgage lenders to complete the Financial Assessment Update screen on Home Equity Conversion Mortgages (HECMs) with negative residual income, the agency announced in a memo Friday.

In establishing the HECM Financial Assessment system requirements for FHA Connection, the FHA provided functionality for lenders to enter the type of compensating factors considered in the underwriting decision.

These system requirements, however, did not allow mortgagees to enter a negative number in the “Residual Income” data field, or allow them to enter income available from compensating factors that would supplement the mortgagor’s residual income.

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To allow the entry of a negative residual income amount in the FHA Connection for HECMs, the agency indicated that temporary procedures will be available as of August 31, 2015.

For HECMs that closed before Aug. 31 with negative residual income, that could not be delivered prior to making the system change, FHA states that mortgagees may request a refund of MIP Late Charges and Interest when performing Loan Set Up in the HERMIT system.

In the same memo, subsequent to the release of the HECM Calculator Version 2.2, FHA was notified that the software incorrectly defaults in some cases the 2.50% mortgage insurance premium rate when a value is entered in the “Cash from Borrower” and “Cash from Lender” fields.

The temporary procedures for the HECM Calculator Version 2.2 will also be available on August 31, 2015 for HECMs that are in process and have not yet closed.

FHA said it will implement changes to the HECM Calculator software in the near future to address these limited situations.

Written by Jason Oliva

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  • Perhaps the changes to the FHA Connection system regarding MRIS and compensating factors will allow for better underwriting results and reduce the NOR paranoia that applicants are encountering.

    I look forward to the changes for the HUD HECM calculator software.

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