The U.S. Department of Housing and Urban Development (HUD) has again delayed the end of the review period of the draft Home Equity Conversion Mortgage (HECM) Origination through Servicing sections of its Single Family Housing Policy Handbook 4000.1 from December 31, 2021 to January 31, 2022. This is according to Federal Housing Administration (FHA) INFO #21-113, released late last week.

The material, made available at the end of September on the Single Family Housing Drafting Table portal, represents the potential fulfillment of an objective that FHA has previously described since agency officials which came into office with the Joe Biden administration spoke publicly about the HECM program in early 2021.

Previously set to end the review period this past November 15, HUD initially delayed the review period to December 31. This latest delay will allow for additional deliberation and input about the changes by stakeholders and members of the reverse mortgage industry, and the National Reverse Mortgage Lenders Association (NRMLA)’s HUD Issues Committee will be taking the additional time to further refine its own responses on behalf of its membership.

Additional time to review and respond to reverse mortgage guidance

A NRMLA working group overseen by Elly Johnson, co-chair of the association’s HUD Issues Committee, is currently in the process of finalizing the association’s comments to the Department after an in-depth review, according to a communication sent to NRMLA membership shortly after the delay was announced by HUD and FHA. When reached by RMD, Johnson described the additional time as beneficial for incorporating more perspective from association membership into the process.

“We have done some great work on the review of the HECM draft guide,” Johnson told RMD. “We were fortunate to have participation from many NRMLA members who gave their time to support this initiative, and we want to thank each and every one of them for their commitment. I am pleased to say that our review of the handbook has been a success and we are pleased with the input we have gathered so far.”

Generally, a delay in the deadline will allow the Department and industry stakeholders additional time to digest the full scope of changes while also determining the greatest points of potential impact from the industry’s perspective, Johnson said. Since this guidance has been in the works for a while, additional time to form substantive responses is beneficial, she explained.

“The publication of this handbook has been a long time in the making,” she said. “It is imperative that the industry is given ample opportunity to review, so we are very pleased to see that HUD has extended the time allowed for the review and comment period.”

When asked about what the industry should be keeping in mind about the proposed changes, Johnson explained that participation is key and encouraged industry stakeholders to remain engaged and to submit their own comments when they can.

“Since the guide will incorporate years of Mortgagee Letters, FHA Info announcements, FAQs and other policy documents, there is a great deal of information being published and clarified with the publication of this guide,” Johnson said. “I would highly recommend that anyone involved in the origination, closing, funding, servicing or any aspect of the HECM product, take this extended opportunity to review and provide their input. It is a wonderful opportunity to have your voice heard, and to help shape this publication for our industry.”

Details regarding the process for submitting comments can be found on HUD’s dedicated web portal for the Drafting Table.

Recent history of the draft changes

The draft sections posted to the Drafting Table contain proposed “comprehensive consolidation of HECM requirements,” FHA said, which aims to incorporate approximately 150 Mortgagee Letters (MLs) and other policy documents that are currently used by mortgagees when originating or servicing HECM reverse mortgage loans.

“This posting is a continuation of FHA’s progress toward a consolidated, authoritative Handbook 4000.1 that will make it easier to do business with FHA,” the agency said in its announcement of the material’s availability in September. “When the final version is eventually published, the HECM Origination through Servicing sections will provide mortgagees, servicers, appraisers, and other stakeholders with a comprehensive policy resource[.]”

FHA has singled out four specific elements to include in this draft guidance: origination through post-closing and endorsement; appraiser and property requirements; servicing and loss mitigation; and reference glossary and acronyms.

FHA also specified in its initial informational notice that some of the alterations to the relevant sections are being done in an effort to “future-proof” the program for change that could happen at some point down the road.

The consolidation of HECM program guidance has been in development for some time, and was previously alluded to in April 2021 at the NRMLA Virtual Policy Conference by Lopa P. Kolluri, Principal Deputy Assistant Secretary (PDAS) for the Office of Housing and the FHA in a keynote at that event.

“I was actually surprised to learn that the HECM program is still governed by so many individual Mortgagee Letter policy documents,” she explained. “And I find it sort of confusing and inefficient to some extent. And so, we need to take a look at that pretty seriously and make sure that it works for both program participants and for HUD. I’m hopeful that we can get to a consolidated set of policies incorporated into our Single Family Handbook this year.”