Financial Assessment Effects and Updated HUD Training
Dan Hultquist, director of learning and development at ReverseVision, said during a webinar that more than 86 percent of closed loans recorded through in RV Exchange (RVX) did not require a Life Expectancy Set-Aside or LESA. This percentage reflects loan data from March through September 2016. Based on the data, fully funded LESAs account for 12.6% of all closed HECMs. Hultquist said the percentage of partially funded LESAs was not graphically significant as just nine such loans were recorded in RVX during the same six-month period.
Hultquist also broke down the financial assessment data by “capacity” and “willingness,” the two factors lenders use to assess potential borrowers. He said 71 percent of loans were acceptable from a capacity perspective. Of the remaining loans, 26 percent were acceptable based on compensating factors while just 3 percent were not acceptable. Hultquist said willingness (property charges and negative credit) likely contributes to the percentage of loans requiring fully funded LESAs. The effects of compensating factors are difficult to measure without knowing exactly which were used, he said.
Financial assessment was implemented in April 2015 as a means to ensure potential borrowers’ fitness to qualify for a HECM. The quality of financial assessment depends on underwriters and compliance officers, which makes training a high priority.
Updated HUD Training
HUD recently presented an updated training webinar that revises its original September 2015 presentation. The webinar includes details on requirements included in Mortgagee Letter 2016-10 as well as operational errors and policy components that can affect financial assessment. An archived version of the Home Equity Conversion Mortgage (HECM) Financial Assessment Update is posted on HUD’s website where users can register to view it.
More details about the effects of financial assessment and HUD’s updated training are available in Reverse Mortgage Daily’s articles “New Data Reveals Financial Assessment Impact on Reverse Mortgage Volume” and “HUD updates Reverse Mortgage Financial Assessment Training Materials.”