Hecm Reverse MortgageReverse Hecm Mortgage
The date of entry into force is planned for 19 September 2017, but it is not clear how this date will be applicable to current MECMs, in particular those that are or will be due before the entry into force of the standard. There are several codified policy types that were previously published under the Housing and Economic Recovery Act of 2008 (HERA) and the Reverse Mortgage Stabilization Act.
In addition, the definitive rules add certain clauses from the proposal and other clauses that have been reviewed in reaction to opinions submitted. Mortgage creditors must notify the borrowers of all HECM insurance policies and services that the FHA will provide, regardless of whether or not the FHA will offer certain mortgage creditors each one.
The new function will enable the borrowers to obtain information on HECM banking services and to make available to the borrowers the information necessary to make an informed choice as to which services meet their needs. The HECM for Purchase Programme is affected by an incremental origin amendment. Initial programme requests contained in the Mortgagee Letter 2009-11 have now been consolidated and modified.
Lastly, the new regulation amends the original Mortgagee Letter 2014-21 regarding spicing specifications. Eventually, the definitive rules change the 12-month spice demand calculations and start the watch at the HECM close instead of the HECM use. In addition, the definitive rules will now allow the borrowers to redeem a Home Equity Line of Credit (HELOC) that does not comply with seasonal pricing criteria either with borrowers' fund, HECM funding or a mixture of both.
This last one also changes several aspect of operating a reverse mortgage. As an example, the definitive rules require a mortgage creditor to ask the lender whether the lender would like to appoint an alternative name. The mortgage creditor would have to turn to this third person if the debtor so wished, if he could not get in touch with the debtor.
The amendment will impose an extra communications load on the mortgage creditor for the borrower who chooses to name an alternative one. Further changes in the operation of reverse mortgage loans relate to the latest assessment requests. Contrary to the present obligation to provide an expert opinion 30 workingdays after the event due and payable and again not less than 15 workingdays before the execution sales, the new regulation requires an expert opinion 30 workingdays before the execution sales.
Supplementary estimates may be necessary if the security right holder is the winning auctioneer at the time of the compulsory auction to own the real estate, or if the real estate is not sold within six months of purchase to lodge a receivable on the basis of the estimate. One last major modification in the way reverse mortgage loans are serviced is the new "Cash for Keys" programme.
For a long time HUD has been using this programme with forward mortgage loans, and the definitive rules are now taken over by the reverse mortgage programme. As part of the "Cash for Keys" programme, HUD may provide mortgage creditors with a financial stimulus for the legally capable counterparty to perform a certificate instead of execution within six month of HECM becoming due and due.
It can also be used to repay mortgage holders who offer an inducement for a good faith lessee to evict the real estate after enforcement. Mortgage creditors are helped by these disincentives to reduce enforcement and clearance charges, and the borrowers are given a bar inducement to speed up the closure as well. This last regulation seeks to consolidate the many directives that currently apply to the granting and operation of reverse mortgage loans.
Whilst the definitive rules incorporate many of the rules contained in the suggested rules, some observations and replies made during the observation phase will still be assessed and taken into account. In addition, once the regulation enters into force in September 2017, the Commission will be able to implement new guidelines for both origin and maintenance.
There is therefore still substantial scope for further changes and modification of the conditions for granting and operating reverse mortgage loans.