The HECM Loan Comparison Summary is the “best fit” tool designed for presenting borrower options for a reverse mortgage pre-qualification discussion. The initial Loan Comparison Summary document is generated by the loan originator based upon pre-qualification discussions with the borrowers. The contents of the documents cannot be calculated using traditional forward loan origination software platforms or calculators. Generally, lenders provide access to proprietary Home Equity Conversion Mortgage (HECM) software and full LOS resources for this document creation based upon parameters and formulas published by the U.S. Department of Housing & Urban Development (HUD). A sample loan comparison summary is available for review by contacting [email protected]
Specific to this document is the ability for the borrower to view various loan transaction scenarios in a side-by-side presentation format. The program column product details prepared are displayed based upon initial input of the age of the youngest borrower, the property value and location, the current initial and expected rate index and in the case of an adjustable rate product, the current margin.
The resulting loan comparison establishes a preliminary principal limit (the amount of funds available based upon the input values) and then continues to adjust the principal limit by reducing available proceeds per amounts necessary to extinguish all property liens, establish reserves for repairs and monthly servicing fees (if applicable), payment of required Mortgage Insurance Premiums (MIPs) and payment for all permitted closing costs, fees and charges. The actual principal limit is determined by verified input information and a property value set by the underwriter.
Each loan summary document generally provides one or more columns for a Fixed-Rate Saver, Standard Adjustable-Rate and Adjustable Saver Rate product comparison to initially identify the different types of program options, features and benefits available. The remaining proceeds are then presented based upon the payment plan chosen by the borrowers; a lump sum disbursement (for the closed-end Fixed-Rate Saver product) or a line of credit, term payment, or tenure payment option in the case of an adjustable-rate product. Borrowers may also choose from additional payment plan options displayed which include combinations of line-of credit, term and tenure payments in the various loan comparison summary columns as well.
The loan comparison summary is also utilized in the mandated HECM counseling process, wherein counselors will review the presented program and payment plan options with the borrowers to determine the best fit and right choice based upon their desire to remain in their home and remain financially independent or other specific needs.
Accurately estimating the amount of lien payoffs, MIP, reserves, closing costs, fees and charges associated with the HECM loan transaction in addition to the basic input information required to produce the loan comparison summary is an important part of presenting a realistic initial review of the HECM program choice. Borrower discussions should also include evaluating overall borrower and property eligibility per HECM guidelines and lender underwriting and pricing criteria. The HECM transaction may not meet the needs of some borrowers.
Ralph E. Rosynek Jr. is senior vice president, national production manager for RMS, Reverse Mortgage Solutions Inc. RMS provides complete HECM program training, product availability and partnership access to mortgage professionals through the company RMPath wholesale and correspondent channels. He may be reached by phone at (281) 404-7970 or e-mail [email protected]