Long-awaited Home Equity Conversion Mortgage (HECM) program guidance revisions to the Federal Housing Administration (FHA)’s Single Family Handbook 4000.1 have been published according to an announcement issued by FHA on Tuesday, and interviews with FHA staff conducted by RMD.
The update has been years in the making, and contains “consolidated and comprehensive policies” for the HECM program based on years’ worth of mortgagee letters (MLs) and other piecemeal guidance the industry has had to navigate through disparate sources.
“For the first time ever, all HECM program requirements will be available in a single place,” FHA said in an announcement. “Today’s publication eliminates more than one hundred individual policy documents associated with the HECM program.”
Consolidating that much guidance into a single reference document will “strengthen the understanding and implementation of the program by lenders and servicers, enhancing their ability to actively engage with the more than 60,000 senior homeowners who choose to obtain a HECM to age in place in their own homes each year,” the FHA said.
In a first for her time as U.S. Department of Housing and Urban Development (HUD) Secretary, Marcia Fudge directly commented on the HECM program and the implications of the updated handbook.
“Home Equity Conversion Mortgages (HECM) are one of the strongest tools we have to ensure thousands of seniors can age in place,” Fudge said. “This new guidance will give people one single place to easily access the information needed to obtain and maintain a HECM.”
FHA describes this development as the completion of “its multi-year effort to deliver a consolidated, comprehensive, and authoritative source of Single Family policy for lenders, servicers, and other FHA program participants.”
There are two new HECM sections of the handbook. The first, Section II.B, covers FHA policy for the origination through post-closing and endorsement of HECMs. The second, Section III.B, explains FHA policy for the servicing of HECMs, and loss-mitigation options to assist HECM borrowers who are behind on their loan obligations.
The full document consolidates and supersedes MLs in full or in part going back to 1995. A full list of the individual documents impacted by the consolidation is listed in the updated Handbook document available via HUD’s website.
HUD will allow for additional comments on this revised handbook for 30 days from the date of publication. The final effective date for the new handbook is April 29, 2024.
The work that has gone into the revised handbook has been a long time coming and was made possible by a high level of collaboration with reverse mortgage industry professionals.
This is according to FHA Deputy Assistant Secretary for the Office of Single Family Housing Sarah Edelman, and Office of Single Family Asset Management Director Lisa Saunders.
“[This has] been in the works for a very long time,” Edelman said in an interview with RMD. “It has spanned years. It has often gotten waylaid as other priorities have taken first position. But HECM is so important to this administration, so this has been prioritized.”
Saunders echoed Edelman’s sentiment, lauding the collaboration with reverse mortgage industry professionals. Edelman also praised industry professionals who collaborated with FHA on the final version of the document released today.
“The industry partnership has been fantastic and is a big part of the final product that we’ve released today,” Edelman said. “We’ve had solid engagement throughout the process. When we posted the draft version of the handbook on our drafting table, we received fantastic and very helpful feedback from the industry. I’ve had the opportunity to talk and dig deeper on the topic since then.”
Edelman added that FHA hopes for the new guidance to be beneficial to both industry participants and borrowers, and that the guidance will “ease the barriers for entry” into the reverse mortgage market.
Saunders added that this document and the process that created it is a testament to the collaboration between FHA and the reverse mortgage business.
“I think it’s just a great example of teamwork between FHA and the industry to really rally around the HECM program and try to give it the opportunity to succeed long-term,” Saunders said.
A key player in the development of the industry-side collaboration on the HECM handbook came from Elly Johnson, principal of All Reverse Pro and head of the National Reverse Mortgage Lenders Association (NRMLA)’s HUD Issues Committee.
“We are very excited about the publication of the new HECM guide,” Johnson told RMD. “So much work has gone into this from NRMLA, countless industry participants and FHA. We will be taking a very close look at the guide and providing feedback during the comment period.”
Johnson added that this will be helpful for both industry stakeholders as well as prospective entrants into the business, either in the form of new professionals entering the space or prospective borrowers.
“Having one place to go for HECM guidance will be invaluable,” she said. “I thank those individuals who worked so hard to get this to publication, and I look forward to working with FHA on future enhancements.”
