HUD announced that it is delaying the effective date of the financial assessment and funding requirements for the payment of property charges under its Home Equity Conversion Mortgage (“HECM”) program outlined in HUD Mortgagee Letters 2013-27 and 2013-28 (the “Mortgagee Letters”). The December 20, 2013 announcement said that HUD is considering changes to the guidance contained in the Mortgagee Letters in response to public comments, and that the new guidance will be effective no sooner than 90 days from the date it is issued. The changes announced in Mortgagee Letter 2013-27 to the HECM program requirements include a limit on the initial principal amount which can be disbursed in the first 12 months after closing and the establishment of a new mortgage insurance premium structure. Mortgagee Letter 2013-28 requires lenders to conduct a financial assessment on all prospective HECM borrowers to evaluate the borrowers’ willingness and ability to meet their financial obligations and the requirements of the mortgage. The Massachusetts Division of Banks issued an Industry Letter on HUD’s changes to the financial assessment and funding requirements under the HECM program on September 3, 2013. Lenders with an approved reverse mortgage program are permitted to originate HECM reverse mortgage loans in Massachusetts only if the lender submits documentation to the Division demonstrating compliance with state law requirements and HUD’s revised program requirements, according to the Industry Letter.
Nutter Notes: The Division of Banks announced that it has extended the due date for submitting documentation demonstrating compliance with the financial assessment and funding requirements for the payment of property charges outlined in the Mortgagee Letters and the Division’s Industry Letter. Lenders, including banks, with approved reverse mortgage programs must submit their amended loan documentation and updated policies and procedures to the Division 30 days prior to the effective date to be designated by HUD when HUD issues the new guidance. Massachusetts law requires reverse mortgage loans to be made in accordance with programs that have been reviewed and approved by the Division under Chapter 167E, Sections 7 and 7A of the General Laws of Massachusetts. The law applies to Massachusetts banks and all other mortgagees making reverse mortgage loans under Chapter 183, Section 67 of the General Laws of Massachusetts. The Industry Letter reminds reverse mortgage lenders that they are required to update their programs by filing amendments to their reverse mortgage loan programs with the Division and to establish a deadline for the submission of amendments. Such reverse mortgage loan program amendments must be submitted to the Division on or before December 15. According to the Industry Letter, each lender with an approved reverse mortgage program must submit amended loan documentation along with any updated policies and procedures via compact disk or flash drive to demonstrate compliance with the Mortgagee Letters. Paper submissions will not be accepted.