HUD Updates Reverse Mortgage Financial Assessment Details

The Department of Housing and Urban Development has updated reverse mortgage financial assessment and property charge guidelines as specified in a mortgagee letter released late Wednesday.

Mortgagee Letter 2016-10 outlines several changes to recent reverse mortgage rules, including an updated Home Equity Conversion Mortgage Financial Assessment and Property Charge Guide; revisions to the compounding interest rate for HECM servicing fee set asides; and an addition of a third-party property tax verification fee to allowable fees and charges.

The revised financial assessment and property charge guide; and the servicing fee set aside changes will become effective for case numbers assigned on or after October 3, 2016, according to the Federal Housing Administration. The third-party property tax verification addition is effective as of July 13.


FHA will offer a conference call for industry members on July 21 as a forum to review the new details, the agency noted in its release.

Following the initial implementation of the reverse mortgage financial assessment in April 2015, many lenders expressed uncertainty about some of the details and a need for more concrete guidelines in some instances.

During its most recent public industry correspondence during the National Reverse Mortgage Lenders Association western meeting in Huntington Beach, Calif., HUD representatives stated that the updates would be forthcoming.

The agency specified additional program changes in May aimed at new consumer protections. These included new disclosures, counseling requirements and a cap on the lifetime interest rate for all adjustable rate HECM loans, among others.

View Mortgagee Letter 2016-10.

Written by Elizabeth Ecker

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  • I have not read the mortgagee letter as of yet, I will be doing so this weekend. However, I have to say that trying to keep track of every change and proposed change coming at us in every different direction is becoming over whelming.

    We no sooner get to understand one new ruling implemented, then changes to that ruling keep coming at us! It is no wonder servicing our senior clients have been slowed down drastically.

    Processors are unsure as to what they are doing anymore, underwriters are having to get reviews of their work in fear of making costly mistakes. Something has to give, we need people making these decisions within FHA, HUD the CFPB ETC. on these new rulings and changes coming out to be knowledgeable. Knowledgeable enough to know what will work before implementing a final ruling!

    The frustration and stress level is becoming exhausting on the industry and the people within it. I know NRMLA understands this and is doing all they can, unfortunately, the problem as I see it, lies with those putting together all these changes!

    That is my two cents worth on the subject until I read the mortgagee letter in detail.

    John A. Smaldone

    • John,

      What we cannot lose is our vision and our vigor.

      This is not the way that I would go about changes but nothing is perfect. Some tweaking is normally required after implementation no matter how great the final product.

      Sometimes how we handle change just blows my mind. When financial assessment was introduced, I went to several trainings offered by several different parties. What was strange was either LESAs were calculated or their calculations was ignored. Where the calculation was attempted, it was not just wrong but horribly wrong. In one case the answer was over $63,000 but the trainer showed how it was under $5,000. When questioned about her calculation, she said she did not want to slow down the momentum of the training since our computer software would do that for us. Where I came from that showed a high degree of not taking pride in her work product. Competent professionals almost without exception take pride in their work product.

      Where underwriting came into play, most of the training was good to excellent; anywhere else it was generally sub par. No one seemed to go out of their way to ensure that our either our questions were answered or our experience was superior. Having taken some training early and some late, the quality was all the same and being later did not improve the training experience.

      As to HUD it seems that some change is being made for the sake of change. These changes will not improve FHA risk, reduce costs to consumers, or improve lender profits. So make them. Some of the proposed changes are not even good policy decisions; they need to be rescinded.

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