NEW YORK — The Home Equity Conversion Mortgage final rule won’t be implemented until September 19, but the groundwork for its rollout will begin much sooner.
Department of Housing and Urban Development official Cheryl Walker told an audience at the National Reverse Mortgage Lenders Association’s eastern meeting and exhibition in New York City that the rule will be introduced in three distinct ways: self-implementation beginning September 19, changes to the HECM section of the Single Family Housing Policy Handbook that will be introduced in draft form in the summer, and future mortgagee letters to be issued at an undefined later date.
The “self-implementation” of new rules largely involves regulations that require no further guidance from HUD or the Federal Housing Administration, including changes regarding the payoff of existing unseasoned home equity lines of credit using HECM proceeds, interest-rate lock-in timeframes, and repair set-asides.
Other rules still require additional interpretation from HUD. For instance, the handbook revisions will be posted on the Federal Housing Administration’s draft board in June 2017, Walker said, and will concern four main final rule provisions: the requirement that originators must provide information about all available HECM options, a limitation on the number of mortgages that individual borrowers may hold, a timeline for the certificate of occupancy issuance in HECM for Purchase transactions, and rules regarding seller concessions in H4P deals.
Walker invited members of the audience to submit their commentary after the rules are posted in June, but warned that criticism should be kept to potential improvements to the process, acknowledging that many in the room had hoped for more aggressive changes to the H4P certificate of occupancy requirements.
Under current and future HECM rules, buyers hoping to use the HECM for Purchase option must receive a certificate of occupancy for any newly built home before even applying for a loan.
“It doesn’t help if you’re going to make changes to changes that have already been mentioned in the rules,” Walker said.
A variety of remaining regulations — including items about maximum closing costs appraisal requirements, claim-filing periods, and “cash for keys” — will be addressed in a series of mortgagee letters, which Walker said will hit the drafting table for industry comment by fall 2017.
Walker, who serves as the director of HUD’s Home Valuation Policy Division, concluded her remarks by expressing her concern about artificially high appraisals, saying she’d heard from many appraisers who feel pressure to maximize or inflate the appraised value of a home.
“So it is a real issue. We know that it’s happening in some cases,” Walker said
In addition to ramping up monitoring efforts of appraisers, Walker said the agency plans to provide special training for underwriters, allowing them to identify potentially overinflated appraisals, noting that it’s not just loans that are underwritten — it’s the properties themselves as well.
Written by Alex Spanko
