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HUD issues Final Rule further strengthening the Home Equity Conversion Mortgage (HECM) Program


Dear Licensed Partner,

HUD's Final Rule (Docket # FR-5353-F-03) published in the Federal Register becomes effective for HECM loans with case assignment assigned on or after September 19, 2017.

The following are summary of changes:

  • Limiting Disbursements During the First 12 Months of the HECM:  The maximum disbursement allowed at closing and during the First 12-Month Disbursement Period (for HECM ARMs) and the maximum Borrower's Advance (for HECM Fixed) shall not exceed the lesser of :

    (A) The greater of 60% of the Principal Limit or the sum of Mandatory Obligations and additional 10% of the Principal Limit, or
    (B) The principal limit less the sum of the funds in the Life Expectancy Set Aside (LESA) for payment beyond the First 12-Month Disbursement Period and the Servicing Fee Set Aside.

    The maximum disbursement cannot exceed 100% of the principal limit.

  • HECM for Purchase: Sellers may now pay for the following fees on behalf of the borrower when these fees are validated by the assigned title company:

    a) Fees required to be paid by the seller under state or local law,
    b) Fees customarily paid by the seller in the locality of the subject property,
    c) Home Warranty Policy.

  • Seasoning Requirement Non-HECM Liens: Borrowers can pay off existing non-HECM liens using HECM Proceeds if the liens have been in place for longer than 12 months prior to  the date of HECM closing or have resulted in cash to the borrower in an amount of $500 or less whether at closing or through cumulative draws. Home Equity Line of Credit (HELOCs) are NOT subject to 12 month seasoning requirement.

  • Limitation on number of mortgages: A borrower with a HECM is eligible to obtain future insured HECM loan financing if the existing HECM is satisfied prior to or at closing of the new HECM or the borrower provides legal documentation evidencing release of the borrower's financial obligation to satisfy the existing HECM.

  • Flood Certification as part of Mandatory Obligation: Flood certification fee has been added to the list of mandatory obligations.

  • Title to the Property: Non-Borrowing Spouse (NBS) and Non-Borrowing Owner can hold title to the property along with borrower.
    The borrower, Non-Borrowing Spouse and any Non Borrowing Owner must receive HECM counseling. Individuals on Title will have to sign the security instrument evidencing their commitment of the property as security for the mortgage.
    All Non-Borrowing Spouses and Non-Borrowing Owners shall sign a certification that:
    (1) Consents to their spouse or other borrowing owner obtaining the HECM;
    (2) Acknowledges the terms and conditions of the mortgage; and
    (3) Acknowledges that the property will serve as collateral for the HECM as evidenced by mortgage lien(s).

    All parties must sign Notice of right to cancel and truth in lending/TALC disclosure.

  • Designation of Alternate Contact: The designation of the alternate individual is at the discretion of the borrower. SWMC will ask the borrower for an alternate contact. If the borrower(s) chooses not to provide one, SWMC will accept the evidence of the borrower's decision to opt out of providing one.

  • Interest Rate Lock-In: The expected average mortgage interest rate may be locked in prior to the date of closing or on the date of loan closing.

If you have any questions, please contact your Client Relations Manager at (855) OK-SUNWEST or (855) 657-8693.


Sincerely,
Sun West Mortgage Company, Inc.

18000 Studebaker Road, Suite 200
Cerritos, CA 90703
Phone: (800) 453-7884

SW-1: Our No Overlays Program

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.

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