HUD issues Mortgagee Letter to remind mortgagees of HECM advisor limitationsMortgagePress.comHUD, Mortgagee Letter 2008-14, HECM, FHA requirements
On May 16, the Department of Housing and Urban Development (HUD)
issued Mortgagee Letter 2008-14 to remind lenders of FHA's policies
regarding non FHA-approved entities that participate in HECM
originations.
Under current FHA requirements, FHA approved entities must
complete the full origination process for FHA insured HECMs.
However, non FHA-approved entities may support a HECM origination
for compensation if such entities provide "educational-type"
origination services. To comply with RESPA, a non-approved entity
may receive market rate compensation for actual services performed,
but to also comply with FHA rules, the entity must not perform any
services during the HECM origination process that require FHA
approval. For example, FHA requirements permit non-approved
entities to:
(i) educate prospective borrowers about the reverse mortgage
lending process;
(ii) advise the borrower about different types of loan products
available;
(iii) demonstrate how closing costs and payment options could vary
under each product; and
(iv) maintain regulator contact with the lender to keep the
borrower apprised of the status of the loan application.
Amongst other limitations, the non-approved entity must also "be
'engaged independently by the homeowner' and there must be 'no
financial interest between the mortgage broker and the mortgagee.'"
Moreover, the non-approved entity's compensation "must be 'included
as part of the origination fee' paid to the mortgagee or loan
correspondent" or paid directly from the borrower's own assets. For
a copy of HUD Mortgagee Letter 2008-14, click
here.
