Reverse Mortgage guidance update to FHA’s Single-Family Housing Policy Handbook
On October 31st, the Federal Housing Administration (FHA) made a highly anticipated announcement regarding the Single-Family Housing Policy Handbook 4000.1. This announcement includes the introduction of new sections that specifically address the Home Equity Conversion Mortgage (HECM) program guidelines.
These newly consolidated HECM sections in a single-source handbook provide comprehensive and up-to-date resource that consolidated guidance found in over 100 mortgagee letters, various handbooks, the HECM Financial Assessment and Property Charge Guide, and other FHA HECM publication accumulated over the years. Furthermore, this publication incorporates an updated Glossary and Acronyms section for enhanced clarity and understanding.
This is indeed a momentous occasion for reverse mortgage lenders and servicers. For the very first time, all HECM program requirements are consolidated into a single, accessible resource. This milestone represents a significant step towards bolstering the knowledge, understanding, and effective implementation of the program among lenders and servicers. Simultaneously, it equips them with enhanced capabilities to actively engage with senior homeowners who hold HECMs.
Additionally, the incorporation of HECM into Handbook 4000.1 establishes a more adaptable framework that enables FHA to seamlessly introduce future policy changes.
The new HECM sections of the Single-Family Handbook include:
- Section II.B, covering FHA policy for the origination through post-closing and endorsement of HECMs; and
- Section III.B, covering FHA policy for the servicing of HECMs and loss mitigation options to assist HECM borrowers who are behind on their HECM mortgage obligations.
The changes in the HECM section may be implemented immediately but must be implemented by April 29, 2024. The industry is encouraged to review and familiarize themselves with the new HECM sections in their entirety.
FHA also recently announced changes to the HECM for Purchase Program by expanding the list of acceptable funding sources, including premium pricing and permitting additional interested party contributions to satisfy a HECM borrower’s monetary investment requirement. These changes were published in Federal Register Notice [FR-6382-N-01], and HUD invites public comments by November 24, 2023.
The Proctor Loan Protector Compliance Team is actively reviewing the updates. If Proctor provides tracking services for your entity, your relationship manager will reach out to discuss any changes that may be needed to your business rules.