2015 NRMLA Regional Conference, Day One

7 Apr

Tradition Title Agency representatives Karen Keating and Alison Keating met many of our partners at this year’s National Reverse Mortgage Lenders Association Regional Conference in New York.  Here is a recap of the conference topics, a day at a time.

Day One featured an in-depth session on the Financial Assessment that goes into effect for FHA case numbers assigned on or after April 27, 2015.  In 2012, the FHA promised Congress to restore the insurance fund in two ways:  through Financial Assessment (FA) and Tax and Insurance Set-Asides.

Fundamentally, the FA will assess credit history, assess property charge payment history, and calculate residual income.  This will apply to every HECM, every borrower, without exception.  A full assessment will not be required for a non-borrowing spouse unless their residual income is used as a compensating factor.

There was discussion of the use of FA as a sales tool, providing valuable information to borrowers in the decision-making process.  FA can be used to go further than loan qualification and truly understand the applicant’s situation.  In the same way, analysis of a credit report can be used to track spending habits and credit card debt to see where a particular situation is heading.

The panel gave attendees some useful tips, including the use of a checklist and FA worksheet.

The LESA, or Life Expectancy Set-Aside was discussed extensively.  Based upon income and debt, and the predicted cost of living, borrowers must demonstrate that their residual income is sufficient.  If payment history and income fall within acceptable parameters, a LESA may not be required.

If an applicant does not meet standards even with the consideration of extenuating circumstances, a fully-funded LESA is required.  If credit and payment history is satisfactory but income is insufficient, a partially-funded LESA can be prescribed, where the mortgagor sets aside funds to be provided to the borrower periodically for the payment of property charges.

LESA charges include real estate taxes, homeowners insurance and flood insurance.

It was strongly recommended to read the FA handbook – more than once if possible – to fully understand FA.  You can download the pdf file here:

http://portal.hud.gov/hudportal/documents/huddoc?id=14-22ml-atch2.pdf

 

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