FHA Adds Revised Reverse Mortgage Program Guidance to Single Family Drafting Table

The Federal Housing Administration (FHA) on Wednesday announced that it has posted draft Home Equity Conversion Mortgage (HECM) Origination through Servicing sections of its Single Family Housing Policy Handbook 4000.1 for the review of program stakeholders, and to provide review to the agency for the proposed consolidations. This is according to FHA INFO #21-81, distributed directly to FHA stakeholders.

The material, made available today on the Single Family Housing Drafting Table portal, will be available for stakeholder review and feedback through November 15, and represents the fulfillment of an objective that FHA has previously described since agency officials which came into office with the Joe Biden administration spoke publicly about the HECM program earlier this year.

Draft sections available for review

The draft sections posted to the Drafting Table contain proposed “comprehensive consolidation of HECM requirements,” FHA said, which aims to incorporate approximately 150 Mortgagee Letters (MLs) and other policy documents that are currently used by mortgagees when originating or servicing HECM reverse mortgage loans.

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“This posting is a continuation of FHA’s progress toward a consolidated, authoritative Handbook 4000.1 that will make it easier to do business with FHA,” the agency said in its announcement of the material’s availability. “When the final version is eventually published, the HECM Origination through Servicing sections will provide mortgagees, servicers, appraisers, and other stakeholders with a comprehensive policy resource[.]”

Among the key guidance which the new material will aim to consolidate, FHA singled out four specific items: origination through post-closing and endorsement; appraiser and property requirements; servicing and loss mitigation; and reference glossary and acronyms.

FHA also specifies in its informational notice that some of the alterations to the relevant sections are being done in an effort to “future-proof” the program for future change.

“Similar to other Handbook 4000.1 sections posted for feedback, the draft HECM Origination through Servicing sections contain revisions to policy language for improved clarity and consistency, proposed new policy, and to conform to the Handbook 4000.1 organizational structure,” the notice reads. “These draft sections do not contain policies for HECM non-assignment claims; however, those non-assignment claim sections will be posted for feedback at a future date.”

Review and analysis, forthcoming stakeholder briefing

Wednesday begins a review period of 45 days during which any interested stakeholders are “strongly encouraged” to review the content of the new draft sections, and to submit any relevant feedback related to the proposed changes by November 15.

“Instructions for viewing the draft sections and providing feedback are available on the Drafting Table,” FHA explains. “FHA will carefully consider all feedback received.”

To further dive into the proposed changes for anyone interested in learning about them including direct stakeholder like mortgagees as well as any other interested party, FHA will be holding an informational briefing on Thursday, October 21 from 2:00pm EST/11:00am PST to 3:00pm EST/12:00pm PST.

“FHA will host an industry briefing to provide stakeholders an overview of the organization and structure of the draft HECM sections,” FHA explained in the informational notice. “While the content is geared primarily for mortgagees, servicers and appraisers, all stakeholders are welcome to participate.”

Industry response, recent history

When reached for comment about the new draft changes, National Reverse Mortgage Lenders Association (NRMLA) President Steve Irwin explained that while this occurrence was ultimately expected, it remains welcome and the industry is prepared to communicate with FHA on the proposed changes.

“NRMLA’s members appreciate the initiation of the review and feedback process for the HECM handbook,” Irwin told RMD. “The industry has been anticipating this part of the process for quite some time, and our members are anxious to start gathering appropriate feedback.”

In an emailed message to the association’s membership, NRMLA explained that its U.S. Department of Housing and Urban Development (HUD) Issues Committee led by All Reverse Pro’s Elly Johnson will be preparing industry feedback for a later date. When reached for her perspective, Johnson described the anticipation for the association in providing feedback to FHA.

“We are very pleased to see a draft of the Single Family Housing Policy Handbook 4000.1 for the Home Equity Conversion Mortgage Program,’ Johnson said. “NRMLA and the HUD Issues Committee will work diligently to review, and provide timely feedback to FHA.”

The consolidation of HECM program guidance has been in development for some time, and was previously alluded to this past April at the NRMLA Virtual Policy Conference by Lopa P. Kolluri, Principal Deputy Assistant Secretary (PDAS) for the Office of Housing and the FHA in a keynote at that event.

“I was actually surprised to learn that the HECM program is still governed by so many individual Mortgagee Letter policy documents,” she explained. “And I find it sort of confusing and inefficient to some extent. And so, we need to take a look at that pretty seriously and make sure that it works for both program participants and for HUD. I’m hopeful that we can get to a consolidated set of policies incorporated into our Single Family Handbook this year.”

Consolidating all of the guidance issued thus far into a single place could be generally beneficial for existing and new reverse mortgage industry participants, Kolluri contended.

Read FHA INFO #21-81 at the agency’s website.

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