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b. Mortgagee Pre-endorsement Review Requirements (08/19/2024)
When conducting the pre-endorsement review, the Mortgagee must review and verify data entered in FHA Connection is accurate and correct based on documentation contained in the case binder. The Mortgagee must also review and verify the following items, as applicable. All documents must be legible.
i. HECM Late Submission Letter
The Mortgagee must confirm that the Late Submission Letter is completed, if necessary.
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ii. Financial Assessment Worksheet or Equivalent
The Mortgagee must confirm that the form is completed, containing all information for HECM approval and LESA requirements. The form must be signed and dated by the underwriter.
iii. Borrower and Non-Borrowing Spouse Certifications
The Mortgagee must confirm any required certification is completed in accordance with FHA requirements.
iv. Evidence of Age
The Mortgagee must confirm evidence of the Borrower’s age and the NBS’s age, if applicable, is included.
v. Evidence of the Social Security Number
The Mortgagee must confirm that the HECM file contains evidence of the Borrower’s and any Eligible NBS’s SSN.
vi. HECM Counseling Certificate
The Mortgagee must confirm that the HECM file contains the Certificate of HECM Counseling, received from a Participating Agency and signed by the HECM counselor and all individuals required to complete HECM counseling.
The Mortgagee must confirm that the HECM file contains evidence of lack of Borrower, NBS, and Non-Borrowing Owner competency if HECM counseling is not provided directly to any HECM Borrower, NBS, or Non-Borrowing Owner.
vii. Note (Including HECM Second Note, if Applicable)
The Mortgagee must confirm that the Note is the Authoritative Copy, the Borrower name on the Note matches that on the RLARM, and the required language from the Model Note is present. The Mortgagee must also confirm that:
• the Note has been executed;
• the maximum principal amount, if required by state law, is not higher than the amount referenced on the security instrument; and
• all applicable allonges, agreements, and riders are properly executed.
The Mortgagee must confirm that the HECM file contains a copy of the HECM First Note and HECM Second Note, if applicable.
The Mortgagee must ensure that the HECM Second Note, if applicable, is mailed directly to HUD’s HECM servicing contractor.
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viii. HECM Security Instrument
The Mortgagee must confirm that the security instrument:
• is the Authoritative Copy;
• has been executed (along with all riders indicated on the last page of the security instrument);
• includes, as applicable, a mortgage amount that is at least equal to 150 percent of the MCA;
• lists the same property address as the RLARM (Fannie Mae Form 1009); and
• lists the FHA case number.
After closing, the Mortgagee must record the first Mortgage.
ix. HECM Second Security Instrument, if Applicable
After closing, the Mortgagee must record the second Mortgage. The second Mortgage is not subject to any state or local recording taxes or stamp taxes because the second Mortgage is a Mortgage to the federal government. Recording fees, which are a charge for a service, may be imposed by the local recording office.
The Mortgagee must confirm that the HECM file contains a copy of the second security instrument, if applicable.
The Mortgagee must ensure that the recorded HECM second security instrument is mailed directly to HUD’s HECM servicing contractor.
x. Settlement Statement and Settlement Certification
Mortgagees are responsible for the accuracy of the Settlement Statement or similar legal document.
The Mortgagee must confirm that the Settlement Statement or similar legal document and the Settlement Certification, if applicable, are complete and signed by the Borrower, seller, as applicable, and settlement agent. If the HUD-1 Settlement Statement or similar legal document is provided separately, the Mortgagee must obtain from the Closing Agent a copy of the final statement provided to the seller to keep in the case binder.
The Settlement Statement or similar legal document must indicate that all existing mortgage liens have been fully satisfied or are subordinate to the first and second HECM liens.
The Settlement Certification must contain certification language.
Mortgagees may not change or alter the certification language; exact wording must be used. A Notice of Rejection will be issued when the certification is missing from the FHA case binder.
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xi. Payoff Demands
The Mortgagee must confirm the most recent payoff demand for any mortgage debt paid off using HECM proceeds is included.
xii. Notice to Borrower
The Mortgagee must confirm the notice is included.
xiii. Loan Agreement and Related Exhibits
The Mortgagee must confirm the original loan agreement and the following related exhibits are accurate:
• schedule of closing costs and liens;
• payment plan; and
• Repair Rider, if applicable.
The Mortgagee must confirm that the HECM file contains a copy of the loan agreement and related exhibits.
The Mortgagee must ensure the original HECM loan agreement and exhibits are mailed directly to HUD’s HECM servicing contractor.
xiv. Final Residential Loan Application for Reverse Mortgages
The Mortgagee must confirm the RLARM is signed and dated by the Mortgagee and all Borrowers and/or, if applicable, attorney-in-fact. If the final RLARM is not signed by the Mortgagee, the initial application signed by the Mortgagee is acceptable.
xv. Form HUD-92900-A, HUD Addendum to Uniform Residential Loan Application
The Mortgagee must confirm that form HUD-92900-A, HUD Addendum to Uniform Residential Loan Application, is completed as instructed by FHA and RLARM.
xvi. Seasoning Documentation
The Mortgagee must confirm documentation supporting compliance with seasoning requirements for existing non-HECM liens is included, if applicable.
xvii. Financial Assessment Documentation
The Mortgagee must confirm that documentation verifying and supporting the following is included:
• credit history, including a credit report;
• evidence of CAIVRS authorization code;
• evidence that the SAM Excluded Parties List and HUD’s Limited Denial of Participation List was checked;
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• income verification;
• asset verification;
• property charge verification;
• Residual Income analysis worksheet;
• tax deferral waiver or exemption;
• HECM for Purchase transactions must include documentation to indicate the Borrower’s recent debts were not borrowed to meet the monetary investment requirement;
• cited Extenuating Circumstances and/or Compensating Factors;
• Mortgagee’s decision to require a Fully Funded or Partially Funded LESA; and
• calculation of the amount of any LESA.
Mortgagees must ensure that the Borrower certifies the accuracy and completeness of the financial information.
xviii. Good Faith Estimate
The Mortgagee must confirm the initial and any revised GFEs are included.
xix. Credit Report(s)
The Mortgagee must confirm that the HECM file contains a credit report for each Borrower. If there are multiple credit reports, all credit reports must be submitted in the case binder.
xx. CAIVRS Report
The Mortgagee must confirm that the HECM file contains a clear CAIVRS report or documentation from the creditor agency to support the verification and resolution of the debt.
xxi. Asset Verification
The Mortgagee must confirm that the HECM file contains the VOD and/or bank statements.
xxii. Income Verification
The Mortgagee must confirm that the HECM file contains verification of the Borrower’s income.
xxiii. Gift Letter
The Mortgagee must confirm that the HECM file contains a gift letter, if applicable.
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xxiv. Total Annual Loan Cost Documentation
The Mortgagee must ensure the TALC documentation is included.
xxv. Evidence of Calculations
The Mortgagee must confirm evidence of calculations is included for:
• Principal Limit;
• monthly payment; and
• line of credit.
A screen print is acceptable.
xxvi. Life Expectancy Set-Aside
The Mortgagee must ensure LESA calculations are included, if applicable.
A screen print is acceptable.
xxvii. Power of Attorney, Conservator or Guardian
The Mortgagee must ensure a durable POA or legal document appointing a conservator or guardian, if applicable, is included.
xxviii. Assignment Insurance Option
The Mortgagee must ensure selection of the assignment insurance option.
xxix. Form HUD-92800.5B, Conditional Commitment Direct Endorsement
Statement of Appraised Value
The Mortgagee must ensure form HUD-92800.5B, Conditional Commitment Direct Endorsement Statement of Appraised Value, is included.
xxx. Form HUD-92051, Compliance Inspection Report, or Fannie Mae Form
1004D/Freddie Mac Form 442, Appraisal Update and/or Completion Report, if Applicable
(A) Form HUD-92051, Compliance Inspection Report
The Mortgagee must confirm that form HUD-92051, Compliance Inspection Report, is completed, signed, and dated by an approved inspector. Local government inspection with the underwriter certification may be accepted.
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(B) Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal Update and/or
Completion Report
The Mortgagee must confirm that Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal Update and/or Completion Report, Part B, is completed, signed, and dated by an FHA Appraiser in good standing on the FHA Appraiser Roster.
xxxi. Other Property Inspections and Reports, if Applicable
The Mortgagee must ensure the HECM file contains property inspections and reports to address deficiencies noted by the Appraiser or otherwise required by the Mortgagee to meet MPR.
xxxii. Appraisal Report
The Mortgagee must ensure that Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal Report (URAR), or other appropriate appraisal form, including all attachments and addenda, is complete, and contains the Appraiser’s signature and date.
xxxiii. Flood Certification
The Mortgagee must ensure the Life of Loan Flood Certification is included. If applicable, the Mortgagee must also obtain a:
• FEMA LOMA;
• FEMA LOMR; or
• FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152).
xxxiv. Specialized Eligibility Documents
The Mortgagee must ensure that the HECM file contains all required program-specific documents.
xxxv. Existing Properties Exhibits
The Mortgagee must confirm that the documentation requirements found in the Property Acceptability Criteria section are in the mortgage file.
xxxvi. Hazard Insurance
The Mortgagee must ensure the Hazard Insurance policy is equal to the value of the property improvements.
xxxvii. Title Insurance
The Mortgagee must ensure the HECM file contains a Title Insurance Commitment or other acceptable evidence of title insurance, in an amount not less than the MCA. The title insurance policy must show the Borrower owns the Property in Fee Simple or on a
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Leasehold that complies with FHA requirements, and that the Mortgage will be a first lien of record when recorded.