Reverse mortgage issues commonly encountered by FHA described for professionals

Members of the Federal Housing Administration (FHA)’s Santa Ana Homeownership Center (HOC) are committed to the reverse mortgage industry, but also see some common issues at multiple stages of the loan process that could improve speed and closings if industry professionals addressed them. This is according to a panel hosted by four members of the Santa Ana HOC which took place at the National Reverse Mortgage Lenders Association (NRMLA) Western Regional Meeting in Irvine, Calif. this week.

Among the HOC officials in attendance were Deputy Director Frederick Griefer; Home Equity Conversion Mortgage (HECM) Servicing Specialist Anh Dong; Senior Single-Family Housing Specialist Daniel Mooney; and Housing Program Officer Esther Yamashiro.

Each panelist spoke about different topics including introductory remarks, and common issues in different loan phases including pre- and post-endorsement.

Commitment to the HECM program

Griefer began by tying the aim of the HECM program to the overall mission of HUD, describing how his belief in that mission is what led him into his position at the Santa Ana HOC.

“The opportunity to serve as the Deputy Director of the Santa Ana Home Ownership Center [was right] for a lot of reasons including my belief in HUD’s mission,” he said. “But also, in terms of the Home Equity Conversion Mortgage and the concept of reverse mortgages, I’ve seen firsthand the positive impact it’s had on to allow people the opportunity to be able to live in a house that [its owners] worked so hard over decades to make a home.”

This marked Griefer’s first time attending a reverse mortgage industry gathering, something he hopes to make a “recurring event” over the next several years while in his position at FHA.

“I plan on being with the HOC for a long time to come, so as long as you’ll put up with me I’m happy to be here,” Griefer said to laughs and approval from the audience.

Later before beginning his segment of the discussion, Mooney — a well-known FHA mainstay who has appeared at numerous reverse mortgage industry events — described his excitement in attending.

“I cannot begin to tell you how thrilling it is to have shaken as many hands as I have,” he said to laughs and applause. “My hand maybe got a little sore once or twice, but it’s the most blessed sore hand I’ve ever had. I am so glad to be back.”

Pre-endorsement issues

When discussing common issues on the pre-endorsement side, Yamashiro described how thankfully, the HOC has transitioned to the use of digital files which has helped to increase efficiency and to avoid the use of slower, bulkier traditional mailing of paper documents.

“Everything is all digital now with the advent of FHA Catalyst,” she said. “I hope you’ve noticed that turn times have shortened since the advent of FHA Catalyst, and that is a big advantage. You can get your loans endorsed quicker than you could [using the] paper-based process.”

However, some common issues include missing certain essential documents. Yamashiro brought up document 1004-D, a Fannie Mar document used to update a home appraisal or to provide a final inspection report on the property.

“We have to have [that document], or some other evidence that repairs have been done” she said.

Another more recent issue revolves around HUD form 92900-A, which was introduced at the end of 2020 and is officially called the “Addendum to Uniform Residential Loan Application.” That form is mandated by FHA and requires signatures from the underwriter or other lender representative, as well as the borrower. It has been required for all FHA single-family forward and HECM mortgages submitted for FHA insurance endorsements with case numbers assigned on and after March 22, 2021.

“Four pages, folks,” Yamashiro said of the form. “There’s four pages by the time it comes to us.”

Post-endorsement, geographic limitations

Mooney took on the topic of post-endorsement issues next, first reminding the assembled reverse mortgage professionals that the geographic limitations on such issues have largely dissipated.

“Just to remind everybody, both pre- and post-endorsement was geographically limited to the region that each Homeownership Center oversees, but that changed a few years ago,” he said. “But based on some of the inquiries that still come in, I’m not sure everybody understands that. So you might share this when you get back to your companies to remind everyone that the post-endorsement world is not limited by HOC jurisdiction.”

Mooney described that he can sit in the Santa Ana office or at his home and review loans coming from places such as Puerto Rico or American Samoa, to drive his point home further.

“No one in Santa Ana is geographically limited on a post-endorsement review basis to the nine states we oversee at Santa Ana Home Ownership Center,” he said.

On the post-endorsement side, Mooney described some immediate loan-level issues that were highlighted by the HOC’s quality assurance division review process including the date on the provided counseling certificate,

“If you have a counseling cert that is executed by the borrower on the same day that it was executed by the counselor,  and it’s telephone counseling, that would imply that the certificate was delivered electronically,” he said. “It would imply electronic delivery. It does not evidence electronic delivery, so please have your insurance staff include evidence of the vehicle through which it was delivered, usually an email.”

Other issues brought up by Mooney include those related to appraisals. For properties not on the public sanitation or water utilities, the HOC often sees no commentary from an appraiser regarding the availability of either of those two options, Mooney explained. They may note that such a circumstance is common for the area, but not that services are actually available in the area, and that is a requirement.

“That might be an appraiser area, but I’d remind underwriters that when you execute that direct endorsement approval, you certify you’ve underwritten the appraiser,” Mooney said.

Additionally, if a traditional HECM is retiring an existing forward mortgage, originators should remember to rate the current mortgage’s 12-month payment history. The last major issue he brought up was related to borrower names on case number assignments and notes.

“Last but not least on my particular list is somewhat important, that the borrower’s name on the case number assignment matches the borrower’s name on your note,” he says. “I don’t mean that one name is different on each, but that if there was a middle initial on the case number assignment, you need to make sure [both documents] happen to match to that level of detail.”

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