Financial Assessment on HECM Loans
Dear Licensed Partner,
An increasing number of tax and hazard insurance defaults by borrowers on Home Equity Conversion Mortgage (HECM) loans have led the Department of Housing and Urban Development (HUD) to establish a requirement for a Financial Assessment of a potential borrower’s financial capacity and willingness to comply with mortgage provisions. Effective with case numbers assigned on or after March 2, 2015, HUD requires a Financial Assessment to be completed for each prospective borrower as part of the HECM loan approval (Mortgagee Letter 2014-21 and 2014-22).
The Financial Assessment will include:
Based on the results of the Financial Assessment, a Partially- or Fully-Funded Life Expectancy Set-Aside may be required. The Life Expectancy Set-Aside is the amount withheld from the proceeds of the HECM for the projected payment of property charges during the life of the borrower and will be calculated based on the following:
Fully-Funded Life Expectancy Set-Aside: may be required for both adjustable and fixed interest rate HECMs and Sun West will be responsible for making timely property tax and insurance payments.
Partially-Funded Life Expectancy Set-Aside: may be required for adjustable interest rate HECMs only and the borrower will receive semi-annual payments from Sun West, which must be used to make timely property tax and insurance payments.
Below is a quick summary of how Sun West will analyze the Financial Assessment:
If you have any questions, please contact your Client Relations Manager at (855) OK-SUNWEST or (855) 657-8693.
This information is provided to licensed brokers/lenders only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.