The Federal Housing Administration has issued a press release with revised FHA requirements for Home Equity Conversion Mortgages.
Effective immediately, when processing FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages, alternative supporting documentation is permitted as an alternative to “previously required materials that, in many instances, delayed claim processing” according to the FHA official site.
FHA Commissioner Brian Montgomery is quoted in the press release saying that the rule changes would help keep the FHA Reverse Mortgage program on a “more financially viable path”.
Montgomery says, “Streamlining the HECM claim payment process makes us more responsive to participating lenders…”
FHA’s new HECM guidelines are intended to keep lenders from being “unduly burdened when seeking claims payments when the HECM reaches 98 percent of its maximum claim amount”. It is also intended to reduce the amount of processing time needed in such cases.
These changes are all effective immediately as of the publication date of FHA Mortgagee Letter 2018-08, which is listed as October 22, 2018.
There are now, thanks to the new rules, alternative documentation options for verifying the death of an FHA HECM borrower, for verifying the existence of hazard insurance on properties secured by an FHA reverse mortgage, clarification on what constitutes being “current” on property taxes, etc.
One significant entry in this mortgagee letter is the clarification of the title verification requirements for mobile homes.
The mortgagee letter states, “Servicers must submit evidence that a mobile home is treated as real property under the laws of the state in which the property securing the HECM mortgage is located (e.g., copy of documents from taxing authority evidencing that the home is taxed as real property).”
Most of the rule changes affect how lenders handle certain aspects of the loan; borrowers may or may not be affected depending on what phase of their HECM loan they are in.
If you have questions about how these rules and alternative requirements might affect your HECM loan transaction, discuss your concerns with a lender.
We will explore the policy changes in detail in another blog post.