Last week, the Federal Housing Administration (FHA) issued a new mortgagee letter implementing policy guidance on practices concerning the use of Third Party Verification (TPV) services as an alternative for authenticating employment, income or assets of potential borrowers.
The letter applies to all FHA Title II traditional and reverse mortgages. FHA details that the new policies outlined in the letter revise documentation requirements for the financial assessment of prospective borrowers and allow the use of vendors to verify information directly with the borrowers’ employers or financial institutions. Additional documentation will no longer be required.
Effects on business
Originators seem split on what the actual effects of the policy change will be on the reverse mortgage business.
“I think it’s too soon to tell if this is really going to change anything,” says Michael Mazursky, owner of iReverse Home Loans based in Carlsbad, Calif. “Although it may help certain borrowers streamline the financial assessment process, we haven’t really run into issues with this in the past. The TPV may help with verification of employment (VOE), but there are already services in place for this, like the Work Number, that provides this information for participating employers.”
Others find the news encouraging, because it will simplify the process for the borrower.
“We are glad to hear this news, if this allows us to ask the borrower for less documentation, that’s a huge win for both the borrower and the loan officer,” says Christina Harmes, assistant manager of the C2 Reverse division of C2 Financial Corp, the western United States’ largest mortgage broker. “This should ease the burden of collecting documentation from borrowers and make the third-party verification protocol more efficient and standardized from lender to lender, streamlining the processing which is good for the borrower.”
However, the lack of requirement for some of these verifications previously in the reverse mortgage business tells some originators that this policy will not make a major difference to operations.
“We rarely need to get VOEs or verifications of deposits (VODs) for reverse so unless I am missing something, [this will have] minimal impact,” says Malcolm Tennant, president and co-founder of Access Reverse Mortgage in Clearwater, Fla. “It seems more in line with ‘forward’ mortgage lender practice to allow it, though.”
Speed and efficiency
Concerning the question of whether or not this will actually speed up the financial verification process, originators seem optimistic about the possibility to varying degrees.
“Will this Mortgagee Letter make the process faster? Maybe,” Mazursky says. “I just don’t see it as a real game-changer. I would like to be proven wrong and see borrowers close on their loan quicker, but there are so many other factors in the underwriting process that this doesn’t seem to really move the needle in my view. Unfortunately, I don’t see it as a big deal in the grand scheme of things.”
Of course, putting the information out there for lenders and actually seeing how it will be implemented are two different things, Harmes says.
“What HUD puts out in a mortgagee letter is one thing, and how the information is actually executed at the various lenders is another,” Harmes says. “We as brokers are awaiting direction from lenders on what they will accept. We do have a trained up staff of processors who will be working with our lenders to implement this as soon as they are able.”