Ask The Underwriter
Monday, 31 March 2008 16:00
A compilation of questions for, and answered by a HECM Direct Endorsement Underwriter. Today’s questions are answered by Mr. Ralph Rosynek of 1st Reverse Financial Services, LLC. Mr. Rosynek has been a HECM DE Underwriter for over 4 years and is also one of the founding members of 1st Reverse Financial Services, LLC, a national wholesale reverse mortgage lender based in Westmont, Illinois.
Q: Can any FHA Direct Endorsxaement (DE) Underwriter underwrite an FHA Reverse Mortgage Loan?
A: The short answer is no. Additional training and test cases are required by an approved FHA Mortgagee (Full Eagle) desiring to underwrite and insure Home Equity Conversion Mortgages (HECM’s). For specific credential requirements and approval information, DE Underwriters should contact their respective Underwriting Branch Team Coordinator through the Home Ownership Center (HOC) which granted their original approval.
Q: What is underwritten in a Reverse Mortgage loan since credit scores are not used for qualification?
A: While credit scores are not used, the credit report is an essential part of the underwriting process for purposes of assessment of federal debts and obligations which may impact the final reverse mortgage decision if they are attached to the property and/or are past due. Also, the appraisal becomes a key component in the final underwriting decision in addition to the preliminary title report with correctness and completeness of disclosure, counseling requirements, and verification of the borrower’s eligibility being priority actions as well. A thorough working knowledge of property vesting, trusts, life estates title clearance requirements and investor guidelines is also a prerequisite skill set to complete the reverse mortgage underwriting. Perhaps the best comparison would be the actual difference in approach to the underwriting process. While the “forward” market is fairly automated with AUS technology, the HECM underwriting process is largely manual and not “technologically” assisted. The mind-set of the HECM underwriter is similar to that of a collateral auditor and the process is fairly structured. Unlike the forward market, there are very few, if any, “compensating factors” which when reviewed would overturn or correct a fault/failure of the borrower or collateral. Ultimately the decision not to approve is based upon the inability of the borrower to meet program requirements, the collateral meeting safety, soundness, occupancy and/or established minimum property standards.
Q: Is There a Special Appraisal Required for a Reverse Mortgage Loan?
A: With the exception of the Fannie Mae HomeKeeper, all HECM products require a satisfactory review of a standard FHA Appraisal for purposes of loan approval.
Q: Do Late Payments, Credit Collections or Even Foreclosures Prevent Borrowers from Qualifying for a Reverse Mortgage Loan?
A: Borrower qualifications for a HECM do not include credit ratings, FICO scores or payment history. The presence of collections on the credit report, unless Federal in nature, do not typically preclude a borrower from eligibility nor do foreclosures (unless the property has been sold) or many other types of credit issues. Credit concerns become a priority for the underwriter when there may be or is a potential for attachment to the real estate collateral. Generally, when the credit issue is in the form of a lien/encumbrance against the property, the underwriter must resolve the issue per guidelines in order to allow for the transaction to be insured.
Q: Is It Possible That Someone Applying for a Reverse Mortgage Loan Would Ever Be Rejected, and if so, Under What Conditions?
A: Yes, reverse mortgage loan applications can, and some are, rejected. The most obvious would be a borrower or co-borrower not yet 62 years of age; borrowers not occupying the property as his or her primary residence, or when total indebtedness to be repaid exceeds the principal limit available for the requested HECM product and other means to address the funds shortage are unavailable. Additionally, there may be specific collateral, legal or borrower credit issues which may preclude the transaction from being approved should they remain unresolved.
A note about our subject matter expert: Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5 + years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, please visit www.1streverse.com or call 877-574-1000.
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