Ml33-13

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

DATE:

September 25, 2013

TO:

ALL APPROVED MORTGAGEES

MORTGAGEE LETTER 2013-33

Subject

Home Equity Conversion Mortgage Program’s Mandatory Obligations, Life
Expectancy Set-Aside Calculation, and Purchase Transactions

Purpose

This Mortgagee Letter clarifies policy announced in Mortgagee Letter
2013-27. Additionally, this Mortgagee Letter makes technical corrections to
Mortgagee Letter 2013-27.

Effective Date

The provisions in this Mortgagee Letter for pipeline loans on purchase
transactions are effective Immediately. All other provisions of this
Mortgagee Letter are effective as of September 30, 2013 the effective date of
Mortgagee Letter 2013-27.

Affected
Policies

The policies set forth in this Mortgagee Letter supplement and where they
conflict replace Mortgagee Letter 2013-27. The following policies are
affected:
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

Mandatory
Obligation
Definition

Mandatory Obligation definition;
Mandatory Obligations for traditional and refinance transactions;
Mandatory Obligations for purchase transactions;
Disbursements Included in the First 12-Month Disbursement Limit
and Initial MIP Calculations;
Principal Limit future year increase calculation;
Life Expectancy (LE) Set-Aside calculation;
Purchase transaction pipeline loans; and
Repayments from Insurance and Condemnation Proceeds.

Fees and charges incurred in connection with the origination of the HECM
that are paid at loan closing or for which provision is made at closing for the
mortgagee to subsequently fund any disbursements during the First-12 Month
Disbursement Period that are a condition or a requirement for loan approval
or any disbursements for a Repair Set-Aside, including the cost of repairs and
the repair administration fee.

www.hud.gov

espanol.hud.gov

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Mandatory
Obligations for
Traditional and
Refinance
Transactions

In addition to those items announced in Mortgagee Letter 2013-27,
Mandatory Obligations also include:
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



Mandatory
Obligations for
Purchase
Transactions

Repair Set-Asides;
Property Tax and Flood and Hazard Insurance Payments scheduled for
payment from the Property Charge LE Set-Aside or from HECM
proceeds within the First 12-Month Disbursement Period. Mortgagees
must use the actual insurance premium and actual tax amount. If a
new tax bill has not been issued, the mortgagee must use the prior
year’s amount multiplied by 1.04; and
Property Tax, Flood and Hazard Insurance payments required by the
Mortgagee to be paid at closing.

In addition to those items announced in Mortgagee Letter 2013-27,
Mandatory Obligations also include:





Property Tax and Flood and Hazard Insurance Payments scheduled for
payment from the Property Charge LE Set-Aside or from HECM
proceeds within the First 12-Month Disbursement Period. Mortgagees
must use the actual insurance premium and actual tax amount. If a
new tax bill has not been issued, the mortgagee must use the prior
year’s amount multiplied by 1.04;
Property Tax, Flood and Hazard Insurance payments required by the
Mortgagee to be paid at closing; and
The amount of the Principal that is advanced towards the purchase
price of the subject property.

Disbursements
Included in the
First 12-Month
Disbursement
Limit and
Initial MIP
Calculations

The following items must be included in the First 12-Month Disbursement
Limit and initial MIP calculations:

Principal Limit
Future Year
Increase
Calculation

Mortgagee Letter 2013-27 stated that the Principal Limit shall continue to be
calculated to increase by the Mortgage Note Interest Rate on a monthly basis.
This was an unintentional error. The monthly increase to the Principal Limit
must include the annual Mortgage Insurance rate as well as the Mortgage
Note Interest Rate.





The amount of Mandatory Obligations;
Disbursement to Mortgagor made at closing; and
The amount of the Initial Disbursement Limit not taken by the
Mortgagor at closing for Term, Tenure, Line of Credit, Modified Term
and Modified Tenure Payment Options.
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LE Set-Aside
Calculation

Mortgagee Letter 2013-27 stated that the amount of the LE Set-Aside shall be
calculated based on summation of the current tax and hazard and flood
insurance property charges, adjusted annually by 1.20%. This was an
unintentional error. For future property charge increases, the LE Set-Aside
should be adjusted one time by multiplying the sum of the current tax and
hazard and flood insurance by 1.2.

Purchase
Transaction
Pipeline Loans

FHA only permits a mortgagee to order a case number in FHA Connection for a
mortgage on a property that has been issued a certificate of occupancy. However,
to avoid any negative impact to any mortgagor who had previously entered into a
bona fide sales contract and made an earnest money deposit on a property before
the issuance of Mortgagee Letter 2013-27, FHA will allow mortgagees to request
an FHA case number with an initial MIP designation of HECM Standard or
HECM Saver where:
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


The mortgagee requests the case number on or before September 28,
2013;
The mortgagee obtains a copy of the mortgagor’s bona fide sales contract
and evidence of the earnest money deposit that were executed and paid
by the mortgagor before September 3, 2013; and
The mortgagee must ensure these mortgages close on or before
March 31, 2014.

All other requirements remain applicable and the mortgagee must ensure the
mortgage, the mortgagor, and the property meets all other FHA eligibility
requirements.
Mortgagees must ensure that all purchase transaction mortgages that are pending
on or before September 28, 2013 reflect the proper ADP code. HUD will not
allow the mortgagee to change to the HECM Saver and HECM Standard ADP
Codes after that date.

Repayments
from Insurance
and
Condemnation
Proceeds

Mortgagee Letter 2013-27 stated that the mortgagee must increase the
available Principal Limit if the mortgagor makes a partial repayment. This
general policy is correct; however, Mortgagee Letter 2013-27 unintentionally
omitted an exception to this general policy. If the repayment is from
insurance or condemnation proceeds, then the available Principal Limit shall
be reduced by the amount of such proceeds.

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Information
Collection
Requirements

The information collection requirements contained in this document have
been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned an
OMB control number of 2502-0059. In accordance with the Paperwork
Reduction Act, HUD may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the collection
displays a currently valid OMB Control Number.

Questions

If you have questions regarding this Mortgagee Letter, please call the FHA
Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing
or speech impairments may reach this number via TTY by calling the Federal
Information Relay Service at 1-800-877-8339. For additional information on
this Mortgagee Letter, please visit http://www.hud.gov/answers.

Signature

Carol J. Galante
Assistant Secretary for Housing - Federal Housing Commissioner