HUD Handbook 4000.1 FHA Single Family Housing Policy Handbook

FHA Single Family Housing Policy Handbook

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HUD Handbook 4000.1

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FHA Single Family Housing Policy Handbook

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USER QUICK GUIDE

5 Below are some helpful tips for using HUD Handbook 4000.1, FHA Single Family Housing 6 Policy Handbook (Handbook 4000.1):

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1. Handbook 4000.1 is organized in the sequence of a life cycle of a mortgage.

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2. In this draft section, yellow highlighting on heading titles indicates the entire content

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below the heading title is proposed new content for HECM. Yellow highlighted text in

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section II.D indicates proposed updates to published Handbook 4000.1.

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3. Capitalization of words in Handbook 4000.1 generally denotes terms that are defined in

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the Glossary.

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Handbook 4000.1 ? HECM

FHA Single Family Housing Policy Handbook Table of Contents

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FHA Single Family Housing Policy Handbook

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TABLE OF CONTENTS

3 I. DOING BUSINESS WITH FHA..................................................................................... 1

4 II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT........................... 1

5 A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ................. 1

6 B. TITLE II INSURED HOUSING PROGRAMS HOME EQUITY CONVERSION

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MORTGAGES ........................................................................................................................ 1

8 1. Origination/Counseling Requirements...................................................................................... 1

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a. Required Referral for HECM Counseling .......................................................................... 1

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b. Restrictions on Processing of Applications Before Completion of HECM Counseling .... 2

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c. Individuals Required to Receive HECM Counseling ......................................................... 3

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d. Counseling Prohibited Practices ......................................................................................... 3

13 2. Origination/Processing.............................................................................................................. 4

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a. Applications and Disclosures.............................................................................................. 4

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b. General HECM Insurance Eligibility................................................................................ 27

16 3. Allowable Mortgage Parameters............................................................................................. 50

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a. Maximum Mortgage Amounts.......................................................................................... 50

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b. Maximum Claim Amount ................................................................................................. 50

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c. Interest Rate Options......................................................................................................... 51

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d. Principal Limit .................................................................................................................. 51

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e. Payment Plan .................................................................................................................... 54

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f. HECM Calculator Software .............................................................................................. 55

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g. Disbursement Limits ......................................................................................................... 55

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h. Maximum Mortgage Term................................................................................................ 57

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i. Mortgage Insurance Premiums ......................................................................................... 57

26 4. Underwriting the Property ...................................................................................................... 58

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a. Property Acceptability Criteria ......................................................................................... 58

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b. Required Documentation for Underwriting the Property ................................................. 75

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c. Conditional Commitment Direct Endorsement Statement of Appraised Value ............... 75

30 5. Performing the Financial Assessment of the Borrower .......................................................... 75

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a. Definition .......................................................................................................................... 75

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b. Credit History Review Requirements ............................................................................... 75

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c. Property Charge Payment History Review Requirements................................................ 85

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d. Monthly Expense Analysis ............................................................................................... 88

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e. Effective Income Analysis.............................................................................................. 100

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f. Residual Income Analysis............................................................................................... 126

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g. Asset Requirements ........................................................................................................ 131

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h. Required Documentation ................................................................................................ 139

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i. Final HECM Decision..................................................................................................... 139

40 6. Closing .................................................................................................................................. 150

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a. Mortgagee Closing Requirements................................................................................... 150

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b. Mortgage and Note ......................................................................................................... 166

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c. Adaptation of Loan Documents ...................................................................................... 167

Handbook 4000.1 ? HECM

i

Post Date: 09/29/2021

This is a DRAFT document for posting on the Drafting Table to collect industry feedback. The document will

undergo Departmental Clearance again prior to final publication. See cover page of document for more info.

FHA Single Family Housing Policy Handbook Table of Contents

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d. Disbursement of HECM Proceeds .................................................................................. 167

2 7. Post-Closing and Endorsement ............................................................................................. 168

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a. Pre-Endorsement Review................................................................................................ 168

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b. Mortgagee Pre-Endorsement Review Requirements ...................................................... 168

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c. Inspection and Repair Requirements for HECMs Pending Endorsement in Presidentially-

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Declared Major Disaster Areas ....................................................................................... 174

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d. Procedures for Endorsement ........................................................................................... 175

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e. Endorsement and Post-Endorsement .............................................................................. 183

9 8. Programs and Products ......................................................................................................... 185

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a. HECM For Purchase ....................................................................................................... 185

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b. HECM Refinance............................................................................................................ 207

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c. Condominiums................................................................................................................ 211

13 C. CONDOMINIUM PROJECT APPROVAL .................................................................... 235

14 D. APPRAISER AND PROPERTY REQUIREMENTS FOR TITLE II FORWARD AND

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REVERSE MORTGAGES ................................................................................................ 235

16 1. Commencement of the Appraisal.......................................................................................... 235

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a. Information Required before Commencement of Appraisal .......................................... 235

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b. Additional Information Required Before Commencement of an Appraisal on New

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Construction .................................................................................................................... 235

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c. Additional Information Required Before Commencement of an Appraisal on a Property

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with an Exception from the Lead-Based Paint Poisoning Prevention Act (LPPPA)

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(HECM Only) ................................................................................................................. 235

23 2. General Appraiser Requirements .......................................................................................... 235

24 3. Acceptable Appraisal Reporting Forms and Protocols......................................................... 236

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a. Application of Minimum Property Requirements and Minimum Property Standards by

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Construction Status ......................................................................................................... 236

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b. Minimum Property Requirements and Minimum Property Standards ........................... 238

28 APPENDIX 9.0 - ASSUMED LOAN PERIODS FOR COMPUTATIONS OF TOTAL

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ANNUAL LOAN COST RATES................................................................................. 239

30 SERVICING AND LOSS MITIGATION ? TITLE II INSURED HOUSING PROGRAMS

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HOME EQUITY CONVERSION MORTGAGES (HECM) ................................... 241

32 III. SERVICING AND LOSS MITIGATION .................................................................. 242

33 A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES ............. 242

34 B. TITLE II INSURED HOUSING PROGRAMS HOME EQUITY CONVERSION

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MORTGAGES .................................................................................................................... 242

36 1. Servicing of FHA-Insured HECMs ...................................................................................... 242

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a. Servicing in Compliance with Law................................................................................. 242

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b. Responsibility for Servicing Actions .............................................................................. 243

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c. Providing Information to HUD ....................................................................................... 245

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d. Communication with Borrowers and Authorized Third Parties ..................................... 245

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e. Borrower Disbursements ................................................................................................ 246

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f. Payment Administration ................................................................................................. 249

Handbook 4000.1 ? HECM

ii

Post Date: 09/29/2021

This is a DRAFT document for posting on the Drafting Table to collect industry feedback. The document will

undergo Departmental Clearance again prior to final publication. See cover page of document for more info.

FHA Single Family Housing Policy Handbook Table of Contents

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g. Servicing Fees and Charges ............................................................................................ 250

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h. Interest Rate Changes for Adjustable Rate HECMs ....................................................... 251

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i. Set-Asides ....................................................................................................................... 252

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j. Allowable Fees and Charges........................................................................................... 256

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k. Prepayment ..................................................................................................................... 258

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l. Completion of Required Repairs .................................................................................... 260

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m. Insurance Coverage Administration ............................................................................... 261

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n. Mortgage Insurance Premium Remittance...................................................................... 265

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o. Post-Endorsement HECM Amendments ........................................................................ 266

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p. Occupancy Certification ................................................................................................. 271

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q. Property Maintenance ..................................................................................................... 272

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r. Optional Assignment ...................................................................................................... 273

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s. Demand Assignment ....................................................................................................... 281

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t. Repurchase of Previously Assigned HECM ................................................................... 282

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u. Mortgage Insurance Termination.................................................................................... 284

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v. Record Retention ? Servicing File .................................................................................. 286

17 2. Default Servicing .................................................................................................................. 287

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a. Use of Counseling Agencies ........................................................................................... 287

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b. Due and Payable Servicing ............................................................................................. 287

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c. Defaults for Unpaid Property Charges............................................................................ 294

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d. Initiation of Foreclosure and Reasonable Diligence Time Frames................................. 304

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e. Sale of Property Acquired through Foreclosure or DIL ................................................. 310

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f. Claims ............................................................................................................................. 311

24 3. Programs and Products ......................................................................................................... 316

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a. Presidentially-Declared Major Disaster Areas................................................................ 316

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b. Mortgagee Optional Election Assignment...................................................................... 317

27 APPENDIX 1.0 ? MORTGAGE INSURANCE PREMIUMS.............................................. 328

28 APPENDIX 2.0 ? ANALYZING IRS FORMS ...................................................................... 328

29 APPENDIX 3.0 ? POST-ENDORSEMENT FEES AND CHARGES BY HOC (APPLIES

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TO SERVICING ONLY) ............................................................................................. 329

31 APPENDIX 4.0 ? HUD SCHEDULE OF STANDARD ATTORNEY FEES (APPLIES TO

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SERVICING ONLY) .................................................................................................... 336

33 APPENDIX 5.0 - FIRST LEGAL ACTIONS TO INITIATE FORECLOSURE AND

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REASONABLE DILIGENCE TIME FRAMES (APPLIES TO SERVICING

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ONLY)............................................................................................................................ 336

36 APPENDIX 6.0 - PROPERTY PRESERVATION ALLOWANCES AND SCHEDULES

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(APPLIES TO SERVICING ONLY) .......................................................................... 339

38 A. MAXIMUM PROPERTY PRESERVATION ALLOWANCES ................................... 339

39 B. WINTERIZATION SCHEDULE...................................................................................... 342

40 C. GRASS CUT SCHEDULE................................................................................................. 342 41 GLOSSARY............................................................................................................................... 345 42 ACRONYMS ............................................................................................................................. 396

43 Handbook 4000.1 ? HECM

iii

Post Date: 09/29/2021

This is a DRAFT document for posting on the Drafting Table to collect industry feedback. The document will

undergo Departmental Clearance again prior to final publication. See cover page of document for more info.

II. Origination through Post-Closing/Endorsement B. Title II Insured Housing Programs Home Equity Conversion Mortgages 1. Origination/Counseling Requirements

1 I. DOING BUSINESS WITH FHA

2 II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT

3 A. TITLE II INSURED HOUSING PROGRAMS FORWARD MORTGAGES

4 B. TITLE II INSURED HOUSING PROGRAMS HOME EQUITY CONVERSION

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MORTGAGES

6 The Title II Insured Housing Programs Home Equity Conversion Mortgages (HECM) 7 Origination through Post-Closing/Endorsement section in this FHA Single Family Housing 8 Policy Handbook (Handbook 4000.1) provides the origination, property underwriting, financial 9 assessment, closing, post-closing, and endorsement standards and procedures applicable to 10 HECMs insured under Section 255 of Title II of the National Housing Act.

11 The Mortgagee must fully comply with all of the following standards and procedures in 12 originating, underwriting the Property, conducting the financial assessment, and closing for 13 obtaining Federal Housing Administration (FHA) mortgage insurance on all HECM transactions.

14 If there are any exceptions or program-specific standards or procedures that differ from those set 15 forth below, the exceptions or alternative program or product specific standards and procedures 16 are explicitly stated in Section 8. Terms and acronyms used in this Handbook 4000.1 have their 17 meanings defined in the Glossary and Acronyms sections and in the specific section of the 18 Handbook 4000.1 in which the definitions are located.

19 1. Origination/Counseling Requirements

20 A Home Equity Conversion Mortgage (HECM) refers to a non-recourse, reverse mortgage that 21 allows a HECM Borrower (Borrower) access to equity secured by the Principal Residence with 22 no corresponding monthly mortgage payment.

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a. Required Referral for HECM Counseling

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i. Definition

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Participating Agency refers to all housing counseling and intermediary organizations

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participating in HUD's Housing Counseling program, including HUD-approved agencies,

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and affiliates and branches of HUD-approved intermediaries, HUD-approved multi-state

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organizations, and state housing finance agencies.

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ii. Standard

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The Mortgagee must provide each prospective Borrower with a list of the names,

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addresses, and telephone numbers of the Participating Agencies eligible to provide

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HECM counseling that includes:

Handbook 4000.1 ? HECM Origination

1

Post Date: 09/29/2021

This is a DRAFT document for posting on the Drafting Table to collect industry feedback. The document will

undergo Departmental Clearance again prior to final publication. See cover page of document for more info.

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