CHAPTER 6. CLOSING AND ENDORSEMENT
6-1 PURPOSE. This chapter outlines the procedures for closing and
submitting a loan for endorsement. The procedures for the local HUD
office to follow in endorsing a loan are also explained. Refer to HUD
Handbook 4165.1 for further standard closing and endorsement
procedures.
6-2 GENERAL INSTRUCTIONS. HUD will not provide mortgages and notes for
use with the HECM program. Mortgagees MUST use the model mortgage
forms (Appendices 1 and 4), and the model note forms (Appendices 2, 3,
5, and 6), and the accompanying instructions and footnotes, with only
such adaptation as may be necessary to conform to State or local
requirements. Using the model mortgage and forms provided, a lender
must develop or procure mortgages and notes which comply in form and
substance with both this chapter and all applicable State and local
requirements for a recordable and enforceable mortgage and an
enforceable note. This chapter incorporates all previous mortgagee
letters concerning mortgage and note forms. It may be modified by
subsequent mortgagee letters. A lender must be careful to comply with
the most recent instructions.
A.This chapter does not supersede HUD regulations. It supersedes
anything contained in other HUD administrative issuances, such as
handbooks, notices or mortgagee letters, that prescribes the form
and content of a mortgage or note, and conflicts directly with
these requirements. Some of the mortgage or note language
required or permitted by this chapter may result in a borrower
granting broad rights to a lender while the exercise of those
rights is limited by HUD regulations or administrative issuances.
These requirements do not supersede any such limitations on
borrowers, and a borrower's rights under the mortgage and note
may be exercised only in a manner consistent with all relevant
HUD requirements.
B.Lenders should not seek advance approval of forms from either HUD
Headquarters or local HUD offices. Lenders are responsible for
determining that the mortgage and note comply with all
requirements. However, questions regarding the appropriate
interpretation of Sections 6-2, 6-3, 6-4, and 6-6 may be directed
to:
Department of Housing and Urban Development
Assistant General Counsel for Home Mortgages
Room 9258
451 7th Street, S.W.
Washington, DC 20410
Any requests for changes to the requirements of this chapter
should be directed to the same address. HUD does not expect to
grant case-by-case exceptions.
C.The term "mortgage" as used in this chapter includes any form of
security instrument commonly used in a jurisdiction in connection
with loans secured by residential property, such as a deed of
trust or security deed. The term "note" as used in this chapter
includes any form of credit instrument commonly used in a
jurisdiction to evidence such loans.
D.HUD does not require that a rider be attached to a mortgage for
an adjustable rate HECM. In most States, there is no clear need
to record an extra rider to explain the adjustable rate features
of the mortgage. The description of the note that is given on
the first page of the model mortgage forms should be a sufficient
description of the debt for recordation purposes, so lenders
should use the model mortgage forms with no special adaptation
for adjustable rate loans, if such mortgages would be fully
enforceable under State or local law. However, HUD does allow
the lender to add language to reflect the adjustable rate nature
of the mortgage, if necessary to comply with State or local law.
One or more of the following adaptations may be made to the form:
1)Change the title to "Adjustable Rate Home Equity Conversion
Mortgage."
2)Change the first use of the word "note" to "adjustable rate
note."
3)Change the first use of the word "interest" on the first
page to "interest at a rate subject to adjustment
(interest)."
4)Add additional language, either to Paragraph 1, or as an
additional numbered paragraph at the end of the mortgage,
which references, describes or summarizes the adjustable
rate feature of the note to the extent required by the
lender, or by State or local law.
6-3FORMAT. A mortgage, note, and loan agreement may include the lender's
business name and/or logotype at the top of the form. Although layout
and format are within the discretion of lenders where not specified in
this chapter; size, style, typeface and print should be similar to the
mortgages and notes approved by the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (FHLMC). The Department recommends that lenders include
the last revision date on each form in order to clarify the versions
being distributed.
6-4STATE LAWS. The mortgage instructions and the note footnotes in
Appendices 1-6 identify a number of specific adaptations of the model
forms that are needed to comply with State laws. Other State laws may
require further adaptation. Lenders aware of such laws should bring
them to the Department's attention so that the requirements may be
updated or the local HUD office may issue a Circular Letter reflecting
additional State law requirements. The validity and enforceability of
the mortgage and note will depend on compliance with State law even if
such law is not reflected in this handbook. For this reason, HUD
emphasizes the need for a lender to use mortgages and notes that are
in compliance with State law.
6-5LOCAL HUD OFFICE AUTHORITY. Local HUD offices have authority to
impose additional requirements regarding mortgage and note provisions
for consistency with State laws appropriate to their jurisdictions,
and to advise lenders of any such requirements through a Circular
Letter.
6-6PREPARATION OF SECURITY INSTRUMENTS. The lender must prepare the
following legal instruments (see appendices at the end of this
Handbook for mandatory model forms), as needed for a particular case:
A.Mortgage and note. The lender must provide a copy of the first
mortgage and the appropriate first note (fixed or adjustable
rate) for review by the borrower during the application process
(see Paragraph 4-7), but not later than when the borrower signs
the URLA.
B.Second mortgage and note. The lender must complete a second
mortgage and second note (fixed or adjustable rate) to secure any
payments made by HUD to the borrower. A copy of the second
mortgage and second note need not be provided for review by the
borrower during the application process, however, their
relationship to the first mortgage and first note should be fully
explained. The second mortgage and second note secure any
mortgage payments which might be made by HUD to the borrower in
the event that the lender fails to make the payments under the
loan Agreement.
HUD policy does not require a maximum mortgage amount to be
stated in the mortgage. Where State law requires the mortgage to
reflect a maximum mortgage amount, the lender must use an amount
that is equal to 150% of the maximum claim amount. This amount
is required because the loan payments are secured not only by the
current value of the house but also by any possible appreciation
in value. This amount is intended to protect the borrower in the
later years of the mortgage. When a maximum mortgage amount is
stated in the mortgage, the lender is not secured for payments to
the borrower beyond the stated amount. If the mortgage balance
reaches the maximum mortgage amount, payments to the borrower
would cease or the borrower would have to try to extend the
mortgage which may not be possible if the property value has
declined or if other liens were placed on the property. Both of
these risks are greatly reduced when the maximum mortgage amount
is a higher amount.
C.Loan Agreement. A copy of the Loan Agreement (Appendix 7) must
be provided for review by the borrower during the application
process. Three copies of the Loan Agreement must be executed at
closing by the borrower and the lender. The copies of the
agreement will be signed by HUD when the mortgage is endorsed for
insurance. This agreement outlines the process of disbursing the
mortgage proceeds, the obligations and rights of the lender, and
the rights and limitations on the borrower. A Repair Rider
(Appendix 8), containing provisions covering the completion of
any required repairs, must accompany the agreement, if
applicable.
D.Shared Appreciation Rider and Allonge. If the mortgage provides
for shared appreciation, the lender must use the Shared
Appreciation Rider (Appendix 11) and the Shared Appreciation
Allonge (Appendix 12).
E.Condominium or Planned Unit Development (PUD). If the mortgage
to be insured is on a condominium or a home in a PUD, the
appropriate mortgage rider must be used (Appendices 9 and 10,
respectively).
The lender is advised to seek counsel's opinions to assure that State
law has been considered, and that any necessary changes to the model
instruments are made. The model instruments may require modification
to comply with State laws.
6-7BORROWERS LACKING LEGAL COMPETENCY. Power of attorney (durable or
otherwise) may be used for closing documents. Any power of attorney
must comply with State law and allow for the Note to be legally
enforced in that jurisdiction (see Paragraph 4-6).
6-8LOAN CLOSING DATE. The Loan Closing Date for all HECMs is defined as
the date on which the borrower SIGNS the Note. THIS DATE MUST APPEAR,
AND BE IDENTIFIED, AS THE "LOAN CLOSING DATE" IN BLOCK I. ON PAGE 1 OF
THE FORM HUD-1 SETTLEMENT STATEMENT.
A.Regulation Z (12 CFR 226.15) provides the borrower with a right
of rescission for three business days after loan closing.
Lenders are prohibited from charging interest on funds held
available for the borrower during the three day rescission
period. Interest must begin to accrue on the day after the
B.In order to ensure an accurate accounting of interest accrual,
the DISBURSEMENT DATE (the date on which the lender relinquishes
control of the funds) MUST ALSO APPEAR, AND BE IDENTIFIED AS, THE
"DISBURSEMENT DATE" IN BLOCK I. ON PAGE 1 OF THE FORM HUD-1
SETTLEMENT STATEMENT.
For example, if (1) the borrower signs the Note on August 5,
1993, (2) the rescission period expires on August 9, 1993, (3)
disbursement of funds takes place on August 10, 1993, and (4)
interest begins to accrue on August 11, 1993, the following
information should appear in BLOCK I. of the FORM HUD-1 for ALL
HECM LOANS:
I.SETTLEMENT DATE:
LOAN CLOSING DATE AUGUST 5, 1993
DISBURSEMENT DATE AUGUST 10, 1993
C.Since lenders must use the appropriate indices in effect on the
date of loan closing when setting the mortgage interest rate and
the expected average mortgage interest rate for adjustable rate
HECM loans, lenders originating HECMs in escrow closing states
must arrange to have the borrower sign the Note while the same
interest rates are in effect as when the mortgage documents are
drawn.
D.Weekly average yields are published in the Federal Reserve
Bulletin and are made available by the Federal Reserve Board in
Statistical Release H.15(519). This Release is published weekly
on Monday, or on Tuesday if Monday is a Federal holiday, and the
index shown on that release is effective the day it is issued
until the H.15(519) is issued the next week. Statistical Release
H.15(519) is often not released until mid- or late-afternoon on
Monday. Consequently, lenders closing HECM loans on Monday
should use the index from the Statistical Release issued the
previous Monday (one week earlier), and lenders closing HECM
loans on Tuesday should use the index from the Statistical
Release issued the day before closing.
E.For purposes of MIP remittance (see Chapter 7) to Computer Data
Systems, Inc. (CDSI), lenders must use the "LOAN CLOSING DATE"
from BLOCK I. of the FORM HUD-1 to complete the CDSI "CLOSE DATE"
field, and must continue to use the "DISBURSEMENT DATE" in the
CDSI "FUND DATE" field on the LOAN SET-UP screen.
6-9REQUIREMENTS FOR CLOSING. At or before closing, the following must be
accomplished:
A.During the application process, in order to provide the borrower
with an estimate of his or her principal limit and to allow the
local HUD office to verify that the correct indices are being
used, the lender should use the indices in effect at the time the
application is signed. The lender MUST recalculate the principal
limit at closing using the indices in effect on the day of
closing.
B.On the day of closing, the lender must determine the principal
limit, expected rate, mortgage interest (accrual) rate, and the
margin (if applicable). The expected rate is needed to calculate
the principal limit and payment plan for all borrowers, and is
also the accrual rate for fixed rate HECMs. The mortgage
interest rate is needed to calculate the first year accrual rate
for adjustable rate HECMs. The lender MUST use the indices in
effect on the date of closing.
For adjustable rate mortgages, HUD does not require that the
lender round either the expected rate or the ARM note rate.
Therefore, the lender may round both rates, only one rate, or
none of the rates. However if the lender chooses to round either
rate, the rate must be rounded to the nearest one-eighth (1/8) of
a percentage point (i.e. the nearest 1/8th either up or down) and
must be rounded throughout the life of the loan. Whether or not
a lender decides to round the rates may depend on the preference
of the secondary market investor. Lenders should check with
their investors to determine if rounding will be required. If
the mortgage interest rate is rounded, the lender should refer to
the footnotes of Appendices 3 and 6 for instructions on
appropriate changes to the First and Second Adjustable Rate
Notes.
C.The ten-year Treasury rate is the index which must be used to
establish the expected rate, and the one-year Treasury rate is
the index which must be used to establish the mortgage interest
(accrual) rate for adjustable rate HECMs. Both indices are
published in the Federal Reserve Bulletin and are made available
by the Federal Reserve Board in Statistical Release H.15(519).
This is a national index, which can be obtained from the Federal
Reserve Board, by requesting to be placed on the mailing list for
receipt of the weekly H.15 publication. The address is:
Publications Services
Mail Stop 138
Board of Governors
Federal Reserve System
Washington, DC 20551
D.If the mortgage interest rate (or the index for ARMs) has
increased by more than one percent or the margin has increased at
all since the Firm Commitment was issued, the commitment must be
reprocessed before the loan can close. The lender is also
required to provide the borrower with a new ARM Disclosure
Statement indicating the new rate.
E.On ARMs, the lender must use the one-year Treasury rate (to
establish the initial mortgage interest rate) and the ten-year
Treasury rate (to establish the expected rate) from the same day.
F.The borrower must choose his or her initial payment plan, which
identifies the method by which he or she wishes to receive the
mortgage proceeds.
1)The lender should encourage the borrower to establish a line
of credit along with monthly payments, if he or she has not
done so, to avoid incurring unnecessary costs and
inconvenience when unexpected expenses occur.
2)At closing, the borrower will receive the payment plan
(Appendix 13) that he or she has selected.
3)The borrower must sign the plan, indicating that he or she
has chosen the options contained on the plan.
4)Whenever the borrower changes a payment option or has his or
her payments recalculated, the borrower will receive a
payment plan, and will be required to sign the plan.
G.The lender must prepare the HUD-1 Settlement Statement (or other
similar statement approved by HUD) at least one business day
before closing. The borrower must be allowed to inspect the
statement one business day before closing. As part of HUD's
ongoing effort to strengthen quality control procedures, HECM
lenders are required to obtain certifications to the HUD-1
Settlement Statement from the borrower(s) and settlement agent.
The borrower(s) and settlement agent in a HECM transaction must
sign the applicable certifications below, which must be printed
at the bottom of the HUD-1, or attached to the HUD-1 as an
addendum:
I have carefully reviewed the HUD-1 Settlement Statement, and to
the best of my knowledge and belief, it is a true and accurate
statement of all receipts and disbursements made on my account or
by me in this transaction. I further certify that I have
received a copy of the HUD-1 Settlement Statement.
______________________ _______________
______________________ _______________
Borrower(s) Date
To the best of my knowledge, the HUD-1 Settlement Statement which
I have prepared is a true and accurate account of the funds which
were received, and have been or will be disbursed, by the
undersigned as part of the settlement of this transaction.
______________________ _______________
Settlement Agent Date
WARNING: It is a crime to knowingly make false
statements to the United States on this or any other
similar form. Penalties upon conviction can include a
fine and imprisonment. For details see Title 18 U.S.
Code Section 1001 and Section 1010.
6-10 POST-CLOSING RESPONSIBILITIES. After closing, the lender must:
A.Record the first and second mortgages.
1)The lender is responsible for ensuring that the first and
second mortgages are the first and second liens of record,
and that other liens do not intervene between the first and
second mortgage.
2)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. Taxation of the
property of the Federal government violates the supremacy
clause of the U.S. Constitution.
However, fees are distinguished from taxes. Recording fees,
which are a charge for a service, may be imposed by the
local recording office. Customary and reasonable fees to
record the second mortgage may be collected from the
borrower by the mortgagee.
B.Submit the original second mortgage, along with any riders, to
the local HUD office after recording. The lender should submit
the original second mortgage to HUD with the closing package if
recording has been completed by that time. Otherwise, the lender
should submit the document to HUD immediately after recording.
If local recording office will be submitting the second mortgage,
they should be fully instructed with respect to the correct
address for the appropriate local HUD office to which the second
mortgage should be sent.
6-11REQUIRED DOCUMENTS FOR ENDORSEMENT. The following documents must
be submitted by the lender to the local HUD Office for
endorsement:
A.Mortgagee's Certification. To facilitate endorsement, the lender
must certify that the mortgage has been closed in accordance with
all HUD requirements. The following closing certification must
be executed (signature, title, and date) by an officer or
authorized signatory of the company:
"We (name of company), Mortgagee at the time of closing of
this mortgage loan, certify that we have reviewed the
outstanding commitments, legal instruments, closing
statements and other documents of mortgage loan closing.
Our review indicates that the mortgage loan has been closed
in accordance with the statutory and regulatory requirements
of the National Housing Act and HUD and that the terms of
the outstanding commitments have been satisfied to the best
of our knowledge and belief"
B.Certified true copy of the signed first mortgage and first note.
The lender must ensure the accuracy of the information on the
instruments and that they were completed as prescribed by
Appendices 1, and 2 or 3, along with appropriate allonges and
riders.
C.Original or certified true copy of the signed second mortgage and
original second note to be held by HUD. The lender must ensure
the accuracy of the information on the instruments and that they
were completed as prescribed by Appendices 4, and 5 or 6, along
with appropriate allonges and riders.
D.Original Loan Agreements. Three original Loan Agreements
(Appendix 7) signed by the borrower and the lender must be
included. The authority to sign the Loan Agreement has been
delegated to the Director of the Single Family Housing Division
of a local HUD office. They may, in turn, re-delegate this
authority to subordinate employees of the Department.
E.Copy of the Borrower's Initial Payment Plan. The lender must
submit a copy of the borrower's initial payment plan signed by
the borrower (Appendix 13).
F.MIP Statement of Account (SOA). The lender must submit the SOA
to confirm payment of the MIP.
G.HUD-1 Settlement Statement. A HUD-1 Settlement Statement, or
other similar statement approved by HUD, and the Addendum to the
HUD-1 containing borrower and settlement agent certifications
must be completed at closing, and copies of these documents must
be submitted. For appropriate HUD-1 Settlement Statement and
closing certifications, see Paragraph 69G. above.
H.Evidence of Hazard Insurance Policy. The lender must provide
evidence of a hazard insurance policy equal to the value of
insurable property improvements at closing, obtained by either
the borrower or the lender.
I.Title Insurance Policy. The lender must provide evidence of a
title insurance policy at least equal to the maximum claim
amount. The title insurance policy must show that:
1)The borrower owns the property in fee simple or on a
leasehold under a renewable lease for not less than 99 years
or under a lease having 50 years beyond the youngest
borrower's 100th birthday, and
2)That the mortgage will be a first lien of record when
recorded.
Many State laws require that a maximum mortgage amount be stated
in the mortgage or deed of trust, and consequently the amount
recorded will be equal to 150% of the maximum claim amount,
rather than the property value or the maximum mortgage amount
under Section 203(b) of the National Housing Act.
Notwithstanding this larger amount for the purpose of
recordation, the title insurance policy obtained should be equal
to the maximum claim amount, NOT 150% of that amount.
In order to avoid incurring unnecessary expenses, lenders must
review borrower eligibility requirements (age, Federal credit
record, principal residence) before ordering a title insurance
commitment to be paid for by the borrower.
J.Choice of Insurance Options. The mortgagee should indicate in
writing its choice of the assignment or shared premium insurance
options.
K.Copy of the Notice of the Right of Rescission. This notice must
be given to the borrower at closing according to Regulation Z
requirements (12 CFR 226.15). This notice informs the borrower
of his or her right to rescind the contract within three (3) days
of loan closing. The notice must be signed and dated by the
borrower to indicate receipt date.
M.Proof of Compliance with Conditions on Firm or Conditional
Commitments. The lender must submit proof that the borrower has
satisfied any conditions which were placed on his or her
approval, including proof of payment of any delinquent Federal
debts.
6-12REVIEW OF THE CLOSING DOCUMENTS. HUD review of the closing
package will comprise the following:
A.Lender's Certification. Verify that the lender's certification
meets the requirements as stated in Paragraph 6-11A., above.
B.Certified true copy of the signed first mortgage and first note.
1)Verify that the information on the instruments is accurate
and that they include the uniform covenants prescribed by
Appendices 1, and 2 or 3.
2)Verify that the mortgage interest rate is no more than one
point higher than the rate disclosed for processing the Firm
Commitment (increases of more than one point require
reprocessing of the commitment) and that the margin has not
increased at all since the Firm Commitment was issued (any
increases require reprocessing of the commitment).
3)Verify that appropriate riders and allonges have been
included.
C.Original or certified true copy of the signed second mortgage and
original second note to be held by HUD. Verify that information
in the instruments is accurate and that they were completed in
the manner prescribed by Appendices 4 and, 5 or 6. The same
riders and allonges accompanying the first mortgage and note must
also be included.
D.Original Loan Agreements. Ensure that three Loan Agreements are
completed and that they adhere to the sample format in Appendix
7.
E.Copy of the Borrower's Initial Payment Plan.
1)The Mortgage Credit Examiner should review the plan using
the HECM software to ensure that the payments were
calculated correctly, and that the borrower signed the plan.
2)The examiner must ensure that the expected rate is either
equal to the mortgage interest rate (for a fixed rate
mortgage) or equal to the ten year Treasury rate plus the
margin (if applicable). For an ARM, the examiner must
ensure that the one-year Treasury rate and the ten-year
Treasury rate were released on the same day, and that the
loan closing took place while those rates were in effect.
F.Initial MIP Statement of Account. Verify payment of the initial
MIP by the Statement of Account submitted by the lender.
G.HUD-1 Settlement Statement. Review the HUD-1, or other similar
statement approved by HUD, to ensure that all charges are
allowable.
H.Evidence of Hazard Insurance Policy. Verify evidence of a hazard
insurance policy equal to the value of insurable property
improvements.
I.Evidence of Title Insurance Policy. Verify evidence of a title
insurance policy at least equal to the maximum claim amount. The
title insurance policy must show that the borrower owns the
property in fee simple or on a leasehold as described in
Paragraph 6-11I., and that the mortgage will be a first lien of
record when recorded.
J.Choice of Insurance Options. The lender must select the
assignment or shared premium insurance options.
K.Copy of the Notice of the Right of Rescission. Verify evidence
of the borrower's receipt of this notice at closing, as required
by Regulation Z (12 CFR 226.15). The notice must give the
borrower three (3) days to rescind on the contract and must be
included. The notice must be signed and dated by the borrower to
indicate receipt date.
M.Proof of Compliance with Conditions on Firm and Conditional
Commitments. Verify that the borrower has complied with any
conditions on his or her approval, including proof of payment of
any delinquent Federal debts.
6-13THIRD-PARTY FEES. In addition to the following list of fees and
charges, the local HUD Office may authorize or reject any other
charge, or the amount of any charge, based on what is reasonable
and customary in the area.
A.Appraisal Fee and Inspection Fee. The borrower may pay HUD's
established maximum fee, or the actual cost of the service,
whichever is less.
B.Credit Report. The borrower may pay the actual cost for a merged
in-file report, containing the information currently available
from three consumer credit information repositories.
C.Deposit Verification Charge. The borrower may pay the actual
charge imposed by the depository institution.
D.Document Preparation Fee. The borrower may pay a document
preparation fee if this service is performed by a third-party who
is not controlled by the mortgagee. The mortgagee may not charge
a fee if it performs this service itself.
E.Property Survey. The borrower may pay if a survey is required by
the lender, although a survey is not required by HUD.
F.Title Examination and Title Insurance Policy. A title insurance
policy equal to the maximum claim amount must be submitted in the
closing package, and the borrower may pay for these items.
G.Attorney's Fees. The borrower may pay only if the attorney is
not an employee of the mortgagee, or is not an attorney who
routinely receives referrals from a particular mortgagee AND
issues the title insurance. If an attorney who is not an
employee of the mortgagee is routinely used on referral from the
mortgagee to close loans and issue title insurance, the borrower
may only be charged a notary fee.
H.Settlement Fees. The borrower may pay only if the closing agent
is not an employee of the mortgagee. A fee may be charged if the
settlement agent is an independent company or a subsidiary of the
mortgagee that regularly closes loans for several different
mortgagees.
I.Mortgage Broker's Fees. The borrower may pay only if the broker
is engaged independently by the mortgagor. A broker's fee is
prohibited if there is any financial interest between the broker
and the mortgagee. The broker agreement must be submitted with
the mortgage insurance application.
J.Tax Service Fee. The borrower may NOT pay a tax service fee in
order for the mortgage loan servicer to check the tax rolls in
each county where loans are recorded.
K.Recording Fees and Taxes. The borrower may pay recording fees on
the first and second mortgages that are customary or required in
the area, and recording taxes on the first mortgage that are
required. 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.
L.Tests or Treatments. The borrower may pay for tests or
treatments required by HUD such as tests of water supplies, soil
percolation tests for individual septic systems, or testing for
or treating insect infestation.
M.Courier Fees. The borrower may pay a courier fee for delivery of
a mortgage payoff to a lien holder and for closing documents to
and from the settlement agent. If this arrangement will take
place, a written agreement between the borrower and the lender
must be executed before loan closing.
6-14ENDORSEMENT. The local HUD Office should issue a HUD Form 59100,
Mortgage Insurance Certificate (MIC), on CHUMS after determining
the acceptability of the closing submission by the lender.
A.Loans submitted for endorsement will be entered into CHUMS using
the Endorsement Processing Screen.
B.The local HUD Office will verify the presence of the necessary
documents listed in Paragraph 6-11.
C.Besides borrower and property information, the MIC will contain
information on the ADP code, amortization plan (fixed or ARM),
program I.D., borrower type, living units, interest rate, margin,
cap (2/5 or lifetime), endorsement date and maximum claim amount.
6-15NON-ENDORSEMENT. If the local HUD Office determines that
endorsement is not possible and that the impediments to
endorsement cannot be corrected, the local HUD Office must return
the original Loan Agreements to the borrower and the lender. The
lender must inform the borrower that HUD cannot legally assume
any responsibility for ensuring that the lender makes the
payments required by the loan agreement.
6-16POST-ENDORSEMENT RESPONSIBILITIES. After endorsement, the local
HUD Office must:
A.Sign the Loan Agreements (see Paragraph 6-12D.) and send one
original to the lender, one original to the borrower, and retain
one original.
B.Send a signed Notice to the Borrower (Appendix 14) to the
borrower, which explains the procedures to follow if the
mortgagee fails to make the required payments to the borrower.
C.Ensure that the lender has submitted the original second mortgage
and riders after closing, and retain the original second
mortgage, note and any riders and allonges. The Loan Management
Branch of the local HUD Office will be responsible for retaining
these documents.
6-17 MAINTENANCE OF THE CASE BINDER.
A.During the insurance demonstration. After endorsement, the local
HUD Office should transfer the case binder via pouch mail to
Headquarters at the following address:
U.S. Department of Housing and Urban Development
Office of Economic Affairs
Room 8218
451 Seventh Street, S.W.
Washington, D.C. 20410
B.Following the insurance demonstration. As soon as possible after
insurance endorsement, the local HUD Office will box and ship the
insured case binders to Headquarters in accordance with the
instructions in Chapter 3 of HUD Handbook 2226.1.
| HECM Guidelines |
| Home Equity Conversion Mortgages |
The HECM FHA insured reverse mortgage can be used
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
