[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Notices]
[Pages 56575-56577]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22213]



[[Page 56575]]

Vol. 78

Thursday,

No. 177

September 12, 2013

Part V





Department of Housing and Urban Development





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Changes to the Home Equity Conversion Mortgage Program Requirements: 
Financial Assessments--Solicitation of Comment; Notice

Federal Register / Vol. 78 , No. 177 / Thursday, September 12, 2013 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5735-N-01]


Changes to the Home Equity Conversion Mortgage Program 
Requirements: Financial Assessments--Solicitation of Comment

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: On September 3, 2013, the Federal Housing Administration (FHA) 
issued Mortgagee Letter 2013-27, announcing the implementation of 
several changes to the Home Equity Conversion Mortgage (HECM) program, 
consistent with the authority to make such changes by the Reverse 
Mortgage Stabilization Act, signed into law on August 9, 2013. With the 
exception of new financial assessment requirements and funding 
requirements for the payment of property charges, the new HECM 
requirements will take effect for case numbers assigned on or after 
September 30, 2013. The financial assessment requirements and the 
funding requirements for payment of property charges take effect for 
case numbers assigned on or after January 13, 2014. This notice 
solicits comment for a period of 30 days on the financial assessment 
requirements to be applied on or after January 13, 2014.

DATES: Comment Due Date: October 15, 2013.

ADDRESSES: Interested persons are invited to submit comments regarding 
this notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
notice.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an appointment to review the public comments must be 
scheduled in advance by calling the Regulations Division at 202-708-
3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number via TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Karin Hill, Director, Single Family 
Housing Development, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street SW., Room 9280, Washington, DC 20410-9000, 
telephone number 202-708-4308. (This is not a toll-free number). 
Hearing or speech impaired individuals may access this number via TTY 
by calling the toll-free Federal Relay Service during business hours at 
1-800-877-8337.

SUPPLEMENTARY INFORMATION: On August 9, 2013, the President signed into 
law the Reverse Mortgage Stabilization Act of 2013 (Pub. L. 113-29). 
This new law gives FHA the authority to establish, by notice or 
mortgagee letter, any additional or alternative requirements that the 
Secretary, in the Secretary's discretion, determines are necessary to 
improve the fiscal safety and soundness of the HECM program authorized 
by section 255 of the National Housing Act, which requirements shall 
take effect upon issuance.
    Since the 2009 housing and economic recession, the HECM portfolio 
has experienced major mortgagor demographic and behavioral changes that 
have contributed to additional risks to the FHA Mutual Mortgage 
Insurance Fund (MMIF). Some of the changes include shifting from a 
predominately adjustable interest rate mortgage with mortgagors 
electing to receive payments over time using the line of credit or 
modified tenure/term payment options to a fixed interest rate mortgage 
where mortgagors draw down all funds at the time of closing; younger 
mortgagors with higher amounts of property indebtedness; stagnant house 
prices; and increasing property charge defaults. These and other 
factors have caused higher payouts of insurance claims. Many of these 
changes are highlighted in the June 28, 2012, ``Reverse Mortgages 
Report to Congress'' that was published by the Consumer Financial 
Protection Bureau.\1\ The specific issues facing the HECM program were 
highlighted in the Annual Report to Congress on the Fiscal Year 2012 
Financial Status of the FHA Mutual Mortgage Insurance Fund, issued 
November 16, 2012. This report highlighted the need for FHA to act 
quickly to reverse the high rate of defaults and claims in the HECM 
program.\2\ Recognizing FHA's need to act quickly, Congress passed the 
Reverse Mortgage Stabilization Act of 2013, giving FHA the authority to 
quickly set in place changes to improve the fiscal safety and soundness 
of the HECM program. Acting on this authority, on September 3, 2013, 
FHA issued Mortgagee Letter 2013-27.\3\ The changes being made to the 
HECM program by Mortgagee Letter 2013-27 are listed on the second page 
of the mortgagee letter and discussed in more detail throughout the 
mortgagee letter.
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    \1\ This report is available at http://www.consumerfinance.gov/reports/reverse-mortgages-report/.
    \2\ This report is available at http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-171.
    \3\ The Mortgagee Letter can be found at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee.
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    To help inform a future rule on changes to the HECM program, this 
notice solicits comment on the financial assessment component of the 
mortgagee letter, including the benefits and costs involved with the 
financial assessment. The purpose of the financial assessment is to 
evaluate mortgagors' willingness and capacity to meet their financial 
obligations, and their ability to comply with the mortgage 
requirements. The financial assessment is also used to determine 
whether, and under what conditions, the prospective mortgagor meets FHA 
eligibility criteria. An

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increasing number of tax and hazard insurance defaults by mortgagors 
have heightened the need for an assessment of a potential mortgagor's 
financial capacity and willingness to comply with mortgage provisions. 
Accordingly, the mortgagee letter requires FHA-approved lenders to 
perform a financial assessment of all prospective mortgagors on all 
HECM transactions types, i.e., traditional, refinance, and purchase. 
Key components of underwriting HECM transactions include a credit 
history analysis, a cash flow/residual income analysis, an analysis of 
compensating factors and extenuating circumstances and ultimately a 
determination of whether the HECM applicant is eligible for the loan. 
This financial assessment requirement will become effective January 13, 
2014.
    While the financial assessment component will be part of FHA's 
upcoming proposed rule on HECM, FHA solicits comment in advance of the 
proposed rule. Comments submitted in response to this solicitation will 
be taken into consideration in the development of the proposed rule.

    Dated: September 6, 2013.
Carol J. Galante,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 2013-22213 Filed 9-11-13; 8:45 am]
BILLING CODE 4210-67-P