Today, the Department of Housing and Urban Development released a 59-page Home Equity Conversion Mortgage (HECM) Final Assessment and Property Charge Guide. The guide’s purpose is to provide underwriting guidance and documentation requirements for completing the financial assessment which is a requirement for mortgage approval.
The guide provides specific policy requirements on:
- performing the credit history analysis and cash flow/residual income analysis;
- evaluating extenuating circumstances and compensating factors;
- evaluating the results of the financial assessment to determine eligibility for the HECM;
- determining if funding sources for property charges from HECM proceeds will be required;
- completing a financial assessment worksheet; and
- verification requirements and documentation standards for credit, income, and expenses.
HUD also issued an accompanying Mortgagee Letter (2014-22) stating that the financial assessment requirements are effective for all case numbers issued on or after March 2, 2015. The guidance also comes with the requirement that lenders take into account the capacity and willingness of a borrower to meet his/her loan obligations. The guide itself can be found here and the mortgagee letter can be found here.