Underwriting Guide 2013 Reverse Mortgage Solutions, Inc. All rights reserved All logos are trademarks of Reverse Mortgage Solutions, Inc.

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1 Underwriting Guide 2013 Reverse Mrtgage Slutins, Inc. All rights reserved All lgs are trademarks f Reverse Mrtgage Slutins, Inc.

2 Welcme t yur Partnership with Reverse Mrtgage Slutins, Inc.! Reverse Mrtgage Slutins, Inc. ("RMS") was frmed in March, 2007 by a grup f leading mrtgage and technlgy executives with ver 121 years f cmbined knwledge and experience t meet the grwing demand fr the servicing and private label sub-servicing f reverse mrtgages. We are pleased t prvide several state-f-the-art, web-based systems t cmpliment ur Cmpany philsphy f superir service t ur custmers and Partners. As ur Chairman, Bb Yeary, likes t say We built the cmpany in reverse ; that is, we designed and built a wrld class servicing and sub-servicing platfrm t ensure that we wuld have a strng, reliable framewrk n which t build ur subsequent riginatin strategies and Partner relatinships. We are a prud member f: Apprved by: Revised 03/2014 Page 2

3 RMS has develped and emplys the fllwing prprietary systems: RMNavigatr RM NAVIGATOR is a true enterprise premier Reverse Mrtgage Servicing System develped specifically fr the reverse mrtgage industry and was a key element in the 'STRONG' rating RMS received frm Standard & Pr's. Designed frm the grund up fr reverse mrtgages, the RM NAVIGATOR system meets all f the requirements f FHA, FNMA and private investrs, as well as prvides "senir" custmers with a user-friendly mnthly accunting statement f their reverse mrtgage. Custm reprting fr Private Investrs and Mrtgage Backed Bnds can be easily accmmdated. Our system perates in a ttally secure and redundant envirnment n a SQL server. RMCmpass RM Cmpass is a web-based riginatin platfrm built specifically fr riginating reverse mrtgage prducts including HECM and unique prprietary lan prducts. It prvides the tls necessary t prspect and market, create, prcess, underwrite, clse, fund and seamlessly deliver reverse mrtgages t ur prprietary servicing platfrm, RMNavigatr. RM Cmpass is available in a standalne cntract based n access and services required, r included as a part f ne f the access levels fr the Whlesale and Crrespndent channels. This versin f the manual cntains the revisins t the fllwing sectins: Page 13 Page 17 Page 27 Page 27 Page 29 Page 30 Page 41 Page 71 Page 77 Page 77 Cunseling Requirements I.D. Exhibits Child Supprt (sectin added) Outstanding Mrtgages Chapter 13 Bankruptcy Delinquent Federal Debt Legally Separated Spuses New Cnstructin (sectin added) Septic Gift Requirements Revised 03/2014 Page 3

4 Table f Cntents Creating the Applicatin... 8 General Cunseling Guidelines... 8 Reverse Mrtgage Cunseling Overview... 8 Wh Must Receive Cunseling... 9 Face-t-Face and Telephne Cunseling... 9 Allwed & Prhibited Activities Prir t Cunseling... 9 Cunseling Fee Cunseling Agencies Natinal Intermediaries as f Nvember State Specific Requirements Cunseling Certificate Update Cunseling in RMCmpass GFE and Related Disclsures Ordering Applicatin Dcuments Required Applicatin Dcuments Gd Faith Estimate Re-disclsures Lan Package Submissin Setup Prcessing Submissin Checklist Reviewing the File frm the Originatr Suspended Files Identificatin Exhibits File Set-Up and Ordering Required Services USPS Brrwer Principal Residence Occupancy Issues FHA Cnnectin Establishing an FHA Case # FHA Cnnectin Resurces fr Establishing a Case # Revised 03/2014 Page 4

5 CAIVRS EPLS and LDP Credit Reprts and Dcumentatin Child Supprt Outstanding Mrtgages Tax Liens Student Lans Bankruptcies Freclsures Previus Mrtgage Freclsure Shrt Sales Judgments Delinquent Federal Debt Fld Certificatin Fld Zne Mapping and Cmmunity Participatin Preliminary Title Cmmitment Vesting Address Taxes, Liens and Payffs Surveys Special Title and Vesting Circumstances Leasehlds Life Estates Subrdinatin Death Certificates Nn-brrwing Spuses Pwer f Attrney Guardian r Cnservatr Living Trusts Signature by Mark Special Prperty Guidelines Planned Unit Develpment PUD Revised 03/2014 Page 5

6 Cndminiums and C-ps Accessry Dwelling Units (ADUs) Mdular Hmes Manufactured Hmes Insurance Hazard Insurance Fld Insurance Appraisal Review Key Appraisal Requirements Appraisal Lgging Repairs Repair Plicy Overview Which Repairs Must Be Cmpleted Repair Set-asides Termite Guidelines HECM fr Purchase Transactin Funding Surces (Assets) Verificatin Gap Financing Maximum Claim Amunt Calculatin Occupancy Verificatin by Lender Principal Residence Repairs Eligible Prperty Types New Cnstructin Prperty Flipping (Seasning) Special Underwriting Tpics HECM t HECM Refinance Transactin Multi-Family Prperties Private Wells, Cmmunity Wells and Septic General Guidelines fr Well & Septic Public Utility Hk-ups Wells Revised 03/2014 Page 6

7 Private Well Shared Well Cmmunity Well Hauled Water Septic Gift Letters Rural, Agricultural and Excess Acreage Private Rads and Shared Driveways Inspectins Termite and Pest Inspectins Rf Inspectins Furnace and Wdstve Inspectins Unused Oil Tanks Cnditins Clearing Prcessing Clsing General Clsing Guidelines Clsing Review HUD-1 Settlement Statement Standard Lan Fees Dcument Preparatin Fee Allwable Clsing Csts Nn Allwable Fees Requesting Lan Dcuments Glssary f Terms APPENDIX A HOW TO ORDER BOOKLETS APPENDIX B - HOME OWNERSHIP CENTERS APPENDIX C - HELPFUL WEBSITES APPENDIX D RESOURCES Revised 03/2014 Page 7

8 Creating the Applicatin In accrdance with the Department f HUD passing regulatins which amended Regulatin X, the new RESPA 2010 changes implement the fllwing elements which cnstitute acceptance f an Applicatin fr a HECM lan: 1. Brrwer Name(s) 2. Subject Prperty Address 3. Scial Security Number 4. Grss Mnthly Incme 5. Estimated Value f Subject Prperty 6. Date f Birth 7. Expected Principal Limit 8. Expected Interest Rate 9. Prduct Type and Margin (if applicable) All Crrespndent Lenders are respnsible fr initial and final disclsures f GFE and related dcuments in cmpliance with RESPA, as well as apprpriate federal and state required disclsures. All Whlesale Partners are respnsible fr initial disclsures f GFE and related dcuments in cmpliance with RESPA, as well as federal and state required disclsures. RMS will redisclse the GFE within 3 business days f ur acceptance f a cmplete lan file under ur Level 2 r Level 3 submissin ptins. Please refer t fr mre regulatry guidance n prper disclsures. It is acceptable fr unmarried c-brrwers t cmplete ne applicatin (FNMA 1009). All Reverse Mrtgage applicatins shuld include an alternate cntact persn. The infrmatin fr the alternate cntact shuld be cmpleted n the 1009 applicatin r Alt Cntact Disclsure. The cntact persn s name, phne #, full address (PO Bx is acceptable) and relatinship t the brrwer are required. In the event RMS is unable t reach the brrwer(s) as needed, the persn whse name appears as the alternate cntact will be cntacted fr assistance in lcating the brrwer(s). Lan details will nt be discussed with this alternate cntact unless the brrwer(s) authrizes such infrmatin t be released. General Cunseling Guidelines Reverse Mrtgage Cunseling Overview Independent reverse mrtgage cunseling, prvided by a HUD-apprved cunseling agency, is required by RMS per the HUD guidelines fr all lans unless therwise nted in this sectin. Cunseling must take place prir t incurring any fees that will be charged t the applicant such as a credit reprt fee, appraisal fee, etc. Lenders are respnsible fr cmpliance with all federal, state and lcal laws and regulatins. Revised 03/2014 Page 8

9 Wh Must Receive Cunseling - All lan applicants wh will sign the mrtgage nte must receive reverse mrtgage cunseling and receive a cunseling certificate, with the fllwing exceptins and additinal prvisins: 1. All Owners Shwn n Prperty Deed RMS requires that that any persn wh is n the deed and/r title at the time f applicatin must be cunseled, regardless f whether they live in the prperty, and regardless f whether they are being remved frm title during the HECM transactin. 2. Nn-Brrwing Spuse RMS requires that a permitted nn-brrwing spuse (based upn the Nn-Brrwing Spuse exceptin criteria) receive HECM cunseling. This requirement applies whether r nt the subject prperty is lcated in a cmmunity prperty r hmestead state. Refer t Nn-brrwing Spuses heading fr additinal requirements. 3. Legally Cmpetent Applicants If Applicant(s) are cmpetent but have granted Pwer f Attrney t anther individual, bth the applicant and his r her attrney-in-fact must receive cunseling and bth must sign a cunseling certificate. 4. Legally Incmpetent Applicants Legally incmpetent applicants must be represented by a guardian, cnservatr r attrneyin-fact. Such representative must receive cunseling and must sign a cunseling certificate n behalf f the brrwer. Cunseling certificates may nt be signed by a legally incmpetent applicant. See the Pwer f Attrney and Guardian r Cnservatr headings fr additinal requirements. 5. Life Estates - Remaindermen If there is a life estate invlved in the title t the subject prperty, RMS requires that persns hlding a reversinary r remainder interest in the prperty als be cunseled. In additin t the parties listed abve wh must receive cunseling, RMS strngly encurages that the fllwing additinal individuals seek HECM cunseling: The cntingent beneficiary(s) f a trust. A cntingent beneficiary is an individual wh will neither receive any benefit frm the trust nr have any cntrl ver trust assets until the primary beneficiaries/hecm Brrwers are deceased. Children r ther relatives f the Brrwer wh reside in the subject prperty (wh are nt als a party required t receive cunseling). Face-t-Face and Telephne Cunseling Except as nted in the State Specific Requirements sectin, cunseling may be cnducted via telephne; hwever, all applicants must be ffered the ptin t meet face-t-face with either the lan interviewer r the cunselr. Allwed & Prhibited Activities Prir t Cunseling The Lender may nly undertake the fllwing permissible activities prir t the applicant(s) Revised 03/2014 Page 9

10 receiving cunseling: Educate the Brrwer abut reverse mrtgages and discuss whether the ptential Brrwer is eligible Run an AVM r similar reprt t help determine the estimated value f the prperty (cannt charge t the Brrwer) Discuss fees and the ptential financial implicatins f reverse mrtgage prducts Prvide the applicant with cpies f the security instrument, mrtgage nte and lan agreement Prvide applicant with list f cunseling agencies Cmplete the initial lan applicatin package Order a title search, hwever, if the lan des nt prceed t clsing, the Brrwer may nt be charged fr the title search. The Lender may nt rder the fllwing befre cunseling is cmpleted: credit reprt appraisal fld certificatin FHA case number The Lender may nly prceed nce cunseling is cmplete, as evidenced by receipt f the cunseling certificate signed & dated by all Applicants and/r their representatives and the Cunselr. Any fees charged t, r cllected frm, the Brrwer must be waived r refunded if they were incurred prir t cunseling. The date the certificate is signed by the Applicant(s) is used t determine the cunseling cmpletin date (nt the date the cunseling ccurred). If the Brrwer, C-brrwer, representative and/r cunselr sign the certificate(s) n different dates, the latest signature date will be cnsidered the cunseling cmpletin date. Other Prhibited Practices Lenders may nt: Steer, direct, recmmend, r therwise encurage an applicant t seek the services f any ne particular cunseling agency Cntact a cunselr r cunseling agency t refer a client; discuss a client s persnal infrmatin, including the timing r scheduling f cunseling; r request infrmatin regarding the tpics cvered in a cunseling sessin Cunselrs may nt: Prvide infrmatin n the specific prices charged by any individual lender Prmte, represent, recmmend, r speak fr any specific lender Market their services t the Lending industry Cunseling Fee Cunseling agencies may charge a fee fr reverse mrtgage cunseling. The fee is generally $125, but may be higher in certain circumstances. RMS reserves the right t require additinal dcumentatin t justify higher fees charged. If cunseling fr related parties such as spuses and children take place separately frm the cunseling sessin fr the applicant(s), the fee may be charged per sessin prvided the ttal fees are disclsed n the Gd Faith Estimate. The Revised 03/2014 Page 10

11 cunseling agency must make a determinatin abut an applicant s ability t pay and an applicant must nt be turned away because f an inability t pay and the agency may nt withhld cunseling r the certificate based n failure t pay. The Brrwer may pay the fee at the time f cunseling r request that it be paid thrugh lan prceeds at clsing. Lenders may nt pay cunseling agencies, directly r indirectly, fr reverse mrtgage cunseling services thrugh either a lump-sum payment r n a case-by-case basis. Cunseling Agencies Lenders are required t prvide every Brrwer with a list f n fewer than 14 HUD-apprved cunseling agencies that can prvide HECM cunseling, 5 f which must be in the lcal area and/r state f the prspective Brrwer with at least ne agency lcated within a reasnable driving distance fr the purpse f face-t-face cunseling. Revised 03/2014 Page 11

12 Natinal Intermediaries as f Nvember 2013 Natinal Fundatin fr Credit Cunseling (866) Mney Management Internatinal (877) Cnsumer Credit Cunseling Svc f Atlanta (866) Natinal Cuncil n Aging (800) ClearPint Financial Slutins (877) Springbard (800) HmeFree (301) Greenpath (888) Neighbrhd Reinvestment Crpratin (888) State Specific Requirements Nrth Carlina: Fr lans clsed in the Lender s name, face-t-face cunseling is required telephne cunseling is nt permitted, unless the Lender is exempt frm the requirement due t federal pre-emptin. In Massachusetts, cunseling must be cnducted by a mrtgage cunseling prgram which has been apprved by the Massachusetts Executive Office f Elder Affairs. The cunseling agency must meet bth HUD-apprval and Massachusetts state apprval requirements. A list f apprved cunseling prgrams in Massachusetts may be fund at: minalcnt ent&f=reverse_mrtgage_cunselrs&csid=eelders. In Califrnia, the list f at least 5 agencies prvided t applicants must include at least 2 agencies that prvide telephne cunseling. If the brrwer did nt receive face t face cunseling, the CA Addendum t Certificate f Cunseling is required. In Minnesta, the Brrwer(s) must be cunseled prir t Lender s acceptance f a final and cmplete applicatin by an independent cunseling agency whse address is in the state f Minnesta. In Tennessee and Vermnt, cunseling must be cmpleted befre an applicatin may be taken. In Suth Carlina, The Advisability f Cunseling Ntice needs t be given t the Brrwer(s) upn initial cntact frm the Brrwer(s). In Rhde Island, the lan may nt be prcessed, ther than rdering an autmated valuatin mdel and a preliminary title search until HECM cunseling has been cmpleted. In additin, he RI department f Elderly Affairs Statement regarding the Advisability and Ability f Independent Cunseling and Infrmatin Services must be given t the Brrwer(s). Revised 03/2014 Page 12

13 Cunseling Certificate Upn cmpletin f the cunseling sessin(s), the cunseling agency will issue a cunseling certificate. The cunselr must generate a Certificate f HECM Cunseling (HUD Frm 92902) thrugh FHA Cnnectin. Certificates that are nt prduced thrugh FHA Cnnectin are nt acceptable. The certificate must cntain: Address f the subject prperty Name f the cunselr Name f the cunseling agency Emplyer Identificatin Number (EIN) f the agency Certificate number (in the upper right hand crner) The certificate must be signed and dated by all applicants and/r their representative as well as the cunselr. Lan prcessing activities may begin nly after cunseling is cmpleted as evidenced by the fully executed certificate. A cpy f the signed certificate, delivered via fax r , is acceptable t begin lan prcessing. The initial lan applicatin must be signed within 180 days frm at least ne Applicant s signature date n the certificate. The lan need nt be clsed prir t this date. The riginal r certified cpy f the cunseling certificate (signed and dated by the cunselr and all ptential Brrwers and/r their representatives) must be included with every lan submissin. Ensure that ptential Brrwers have nt incurred any financial bligatin until after receipt f the cunseling certificate and the Brrwer reaffirms intentin t cntinue with the applicatin. Certificate Expiratin Date The initial applicatin must be taken befre the cunseling certificate expires (it is nt necessary fr a lan t clse befre the certificate expires). If the certificate has expired, the Brrwer may nt waive the additinal cunseling sessin, even if they believe that a secnd sessin wuld nt be useful. If the certificate has multiple brrwers, as lng as at least ne Brrwer s signature n the certificate is within the 180-day expiratin perid, we may cnsider the cunseling certificate as being valid fr all Brrwers n the lan. Update Cunseling in RMCmpass RMCmpass shuld be updated when the Cunseling Certificate is received. Cunseling Agencies and Cunselrs can be selected frm the drp-dwn lists, r added n the Cunseling & FHA screen in the Prcessing tab in the Tlkit. Input the signed dates, and attach a cpy f the Cunseling Certificate if nt already dne. GFE and Related Disclsures A GFE must be prvided t a Brrwer within business 3 days f receiving a cmplete Applicatin. Pursuant t the prevailing RESPA Guidelines instituted in January 2010, a HECM Revised 03/2014 Page 13

14 Applicatin is cnsidered cmplete if the fllwing infrmatin is received by the Originatr and the Applicant has indicated an intent t prceed: Brrwer s Name Brrwer s Mnthly Incme Brrwer s SSN Brrwer s Date f Birth r Age Prperty Address Estimated Prperty Value Prpsed Lan Amunt HECM Prduct Type Interest Rate Initial fee templates are set-up at the time the RMCmpass system is cnfigured. RMS uses an APR chart apprved by ur cunsel which will be the default settings. Fr lans which are NOT clsing in the name f RMS, Cmpany Administratrs are encuraged t seek guidance frm their wn legal and/r cmpliance departments t set up the APR flag defaults based n yur interpretatin f federal regulatins. Certain HUD-1 fees can be edited based n the user s level f access (cntrlled by yur Cmpany Administratr). Ordering Applicatin Dcuments When the data entry is cmplete, the applicatin dcuments can be created by selecting the Order Services link in the Originatr Tlkit in RMCmpass. At the Order Services screen select Applicatin Dcuments. Nte: HECM Calc dcuments, the GFE and TIL must be added t the applicatin rder by selecting Include Attachments. Select Execute and the rder will be transmitted t BayDcs fr fulfillment f the dc rder. These are key applicatin package dcuments cntaining calculatins which are RMS-specific and are required t prvide the Applicant(s) a cmpliant final Applicatin Package. Required Applicatin Dcuments While we prefer that ur Partners utilize RMCmpass as their primary Lan Originatin System t streamline and maximize ur supprt f the entire lan prcess, we d accept Applicatin dcuments generated by ther systems. Hwever, the fllwing listed Applicatin dcuments are required t be included in ALL submissin packages t RMS: HUD A, pages 1 and 2 3. Lan Cmparisn/Scenaris 4. Amrtizatin Schedule 5. Cunseling Fee Disclsure 6. Gd Faith Estimate (GFE) 7. Required Prviders Disclsure 8. GFE Acknwledgment 9. Suggested Settlement Service Prvider List 10. TALC (Ttal Annual Lan Cst) Revised 03/2014 Page 14

15 11. TIL (Truth-in-Lending) (Fixed Rate) 12. List f HUD-Apprved Cunseling Agencies 13. Alternative Cntact Infrmatin Sheet 14. Patrit Act Disclsure 15. Face-t-Face Meeting Disclsure and Electin Frm 16. Imprtant Terms Disclsure 17. Servicing Disclsure Statement 18. Brrwer Certificatin and Authrizatin 19. Tax & Insurance Disclsure 20. Ntificatins & Disclsures (5-page dcument RMS prprietary frm) 21. Acknwledgement fr Electrnic Cmmunicatin 22. Ntice t Nn-Brrwing Spuse r Resident (if applicable) 23. Ownership Interest Certificatin (if applicable) 24. State-Specific Disclsures (Partner is respnsible fr cmplete, accurate state disclsures) 25. Anti-Churning Disclsure (HECM t HECM Only) 26. All necessary Brrwer dcuments Nte: This list is subject t change frm time t time by RMS, and is nt all-inclusive depending n specific Brrwer situatins, state requirements and prperty types. Gd Faith Estimate Re-disclsures Current plicy requires that in the event f any valid changed circumstance all lenders must redisclse t the Brrwer the result f the change and the effect n the Brrwer s lan applicatin. Prcessrs are respnsible fr insuring that any re-disclsure is handled in accrdance withal federal regulatins. Clsers shuld perfrm an additinal audit prir t clsing t assure that all fees are prperly disclsed. 1. Partners shuld cmplete the Valid Change Circumstance (VCC) wrksheet and submit fr apprval t the apprpriate internal authrity. Lan Package Submissin Setup Prcessing The primary functin f Setup Prcessing is t acknwledge receipt f each submissin package and prepare the file fr underwriting. Setup prcessing represents the first peratinal review f the submissin package and cnstitutes a pre-audit review f the file fr all nn-risk cmpnents. Befre submitting the lan applicatin package t Underwriting, ensure that all applicable disclsures have been cmpleted, all exhibits are included, and all parties t the transactin have signed and dated where applicable. Step-by-Step Prcess Prcessr reviews the physical package fr cmpleted frms and signatures and updates RMCmpass sftware if necessary. Prcessr reviews GFE fr cmpliance and re-disclsure if necessary. Revised 03/2014 Page 15

16 Prcessr review Cunseling Certificate Prcessr rders services Primary Required Services: USPS Address Validatin FHAC Services Tri-merge Credit Reprts Fld Certificates Appraisals Preliminary Title Cmmitments Lien Payffs Hazard Insurance Prcessr reviews services as they are received and requests changes where necessary t prvide underwriting a crrect and cmplete reprt. If Valid Change Circumstance ccurs prcessr will re-disclse GFE. NMLS MERS Review f these primary services while cursry in nature is intended t prvide Underwriting with a cmplete picture f the Brrwer and cllateral in an effrt t expedite the underwriting prcess. Brrwer letters f explanatin must be signed and dated by the Brrwer; certain circumstances may warrant a handwritten letter f explanatin frm the Brrwer at the discretin f the Underwriter. Many circumstances can be reslved by phne calls by the Lan Originatr r the Prcessr, in which case a signed and dated Prcessr s Cert may be acceptable. Nte: It is imprtant t highlight unique circumstances in files fr underwriting review by ntating n the Submissin Checklist/Stacking Order, and/r by updating the Message Center in RMCmpass r Ntes screen in Reverse Visin. Submissin Checklist All applicatins submitted fr prcessing and/r underwriting shuld fllw the stacking rder belw with thse items cllected frm the Brrwer integrated int the applicatin dcuments prduced by RMCmpass r Reverse Visin. Reviewing the File frm the Originatr (See als Suspended Files, belw) Review the Applicatin Infrmatin Sheet fr unique circumstances. Review file fr signatures and all required dcuments. Review I.D., S.S., and ther cllected Brrwer dcs fr legibility and cnsistent infrmatin. Review cunseling certificate fr date and cunselr signature. Review RMCmpass / Reverse Visin t ensure all pertinent data has been entered and/r updated. Suspended Files Files which d nt cntain acceptable prf f scial security and/r date f birth, r which lack a Revised 03/2014 Page 16

17 cunseling certificate signed by a licensed HUD Cunselr cannt be prcessed fr underwriting and will be suspended. Prcessrs shuld cntact the riginatr t ntify f the pended status and prvide slutins where pssible t change the file t active status. Ultimately it is the respnsibility f the riginatr t prvide a full and cmplete file fr prcessing. Setup prcessing s rles d nt include string files fr riginatrs. A preliminary title cmmitment is the nly service that can be rdered prir t the date the brrwer signs the cunseling certificate. Identificatin Exhibits All Brrwers must be 62 years f age within 60 days f the applicatin and must be at least 62 years f age at the time f clsing. The fllwing list prvides examples f what are cnsidered acceptable scial security and date f birth exhibits fr Brrwers. The list belw is nt all inclusive. It is at the discretin f the underwriter t decide the acceptability f a dcument. T avid ptential delays, ensure that all exhibits submitted are clear (avid t light/dark, blurry, hand altered, etc) and legible. Evidence f Date f Birth must be current (i.e. may nt be expired) at the time f Underwriting. Examples f Acceptable SSN Exhibits Scial Security Card issued by the gvernment (nt plastic r metal) Scial Security Awards Letter Printuts frm the Scial Security Administratin (acknwledged by SSA if applicable) Medicare card with any f the fllwing cdes: A, J1, J2, J3, J4, LM, M, M1, T, TA Military ID Driver s License Passprt State- issued ID Card Examples f Acceptable DOB Exhibits State-issued driver s license r ID card Certificates f birth Passprts Letter frm the Scial Security Administratin (acknwledged by SSA if applicable) Certificate f United States Naturalizatin (frm N-550 r N-570) Revised 03/2014 Page 17

18 File Set-Up and Ordering Required Services USPS (Verify fr St., Blvd., Ave., etc.) In rder t cnfirm the crrect address fr every lan submissin, yu must cnfirm each Brrwer s address n the United States Pst Office website. T avid cnfusin regarding residency, ntify prcessing/underwriting if the Brrwers mailing address is different than their street address and prvide an explanatin. Brrwer Principal Residence The subject prperty must be the principal residence f each Brrwer, which is defined as the dwelling where the Brrwer maintains his r her permanent place f abde with residency f a minimum f 183 days per calendar year. Fllwing are key elements f ur underwriting plicy: A persn may have nly ne principal residence at any ne time. The prperty will be cnsidered t be the principal residence f any Brrwer wh is temprarily r permanently in a health care institutin as lng as the prperty is the principal residence f at least ne ther brrwer wh is nt in a health care institutin. RMS must be able t cnclude that the subject prperty is the Brrwer s current principal residence. Supprting dcumentatin may be requested at the Underwriter s discretin where dubt exists. Revised 03/2014 Page 18

19 Fr Traditinal HECM and HECM t HECM transactins, all Brrwers must ccupy the prperty at the time f applicatin and clsing, subject t the health care institutin exceptin abve. Satisfactry chain f title dcumentatin must be prvided. In cases where the chain f title indicates recent transfers amng family members r ther nn-arm s length transactins, additinal dcumentatin may be required, such as prf f uninterrupted ccupancy by the HECM Applicant. RMS will nt generally apprve payff f any mrtgage lien(s) n which the Applicant is nt the mrtgagr n the existing debt; exceptins may be reviewed n an individual basis. Fr purchase transactins, the Brrwer(s) must ccupy the prperty within 60 days f clsing. In additin, if the Brrwer s current principal residence is the security prperty fr a HECM, that lan must be paid in full prir t clsing the new purchase transactin the Brrwer may nt have mre than ne utstanding FHA lan at any time under HUD regulatins. RMS s seasning plicy is in accrdance with HUD guidelines; hwever, if the Brrwer(s) have held title t the subject prperty fr less than 90 days at the time f applicatin, a desk review f the appraisal may be required at Underwriter s discretin. Occupancy Issues There may be circumstances where ccupancy is in questin in a lan file. Each lan file may have specific factrs that affect the ccupancy issue and each lan file shuld be addressed individually fr this purpse. Fr instances where ccupancy is in questin we may require additinal dcumentatin t supprt the lan file. The final decisin n what dcumentatin is acceptable will be the respnsibility f the underwriter. Examples f discrepancies that can indicate an ccupancy issue are: (list is nt all inclusive) Prperty address n 1009 des nt agree with the Credit Reprt and/r True Alert Multiple Address assciatins n the Credit Reprt/True Alert Driver s License des nt agree with the prperty address n the 1009 Brrwer wns mre than ne prperty Subject Prperty des nt indicate Hmestead and brrwer wns ther prperty that is listed as Hmestead If ccupancy is an issue and additinal dcumentatin is required, we will require dcumentatin frm the list belw: Prvide ONE f the fllwing: Cpy f brrwer s driver s license (if recently changed may require alternative dcumentatin) Cpy f SS award letter r cpy f SS check if nt direct depsited Cpy f brrwer s bank statement where SS funds are direct depsited Prf f Hmestead fr subject prperty And prvide TWO f the fllwing: Cpy f brrwer s vided check Cpy f brrwer s mrtgage statement Revised 03/2014 Page 19

20 Cpy f brrwer s aut insurance plicy page Cpy f brrwer s hmewner s insurance plicy page Cpy f brrwer s credit card statements Cpy f brrwer s vter registratin card Cpy f brrwer s cable/phne bill Please nte: The Underwriter reserves the right t ask fr additinal dcumentatin and/r explanatin regarding wner ccupancy f subject prperty. FHA Cnnectin FHA Cnnectin is an internet-based system that allws FHA apprved lenders access t FHA s systems fr the purpse f riginating, prcessing and servicing HECM lans. If yu are nt currently registered with FHA Cnnectin yu will need t register prir t prcessing a HECM lan. T register, please visit: Establishing an FHA Case # NOTE: Fr Level 2 and Level 3 Partners (Spnsred TPO s), please cmplete the FHA Case Assignment Request frm and fllw instructins n the frm fr submissin t RMS. RMS will btain the case # n yur behalf, and send yu the FHAC print screen reflecting the case # within 24 hurs. All Case Assignment requests shuld be ed t CaseAssignsEast@RMPath.cm r CaseAssignsWest@RMPath.cm. Revised 03/2014 Page 20

21 FHA Cnnectin Resurces fr Establishing a Case # Revised 03/2014 Page 21

22 FHA has specific infrmatin n hw t establish a case # at the fllwing website: Revised 03/2014 Page 22

23 CAIVRS The Credit Alert Interactive Vice Respnse System (CAIVRS) is a Federal interagency database that cntains the fllwing: Delinquent debt infrmatin frm the Departments f Husing and Urban Develpment, Agriculture, Educatin, and Veterans Affairs and the Small Business Administratin. Lien judgment infrmatin frm the Department f Justice. CAIVRS Authrizatin is used t access CAIVRS and determine if a ptential brrwer has a Federal debt that is currently in default r freclsure r has had a claim paid by the reprting agency within the last three years. Federally apprved lenders must use CAIVRS t prescreen all applicants fr Federally insured lans, except fr FHA streamline refinance cases. CAIVRS prvides up t ten sets f infrmatin fr each brrwer. A unique Authrizatin Number is issued each time a brrwer is checked in CAIVRS (this is als referred t as the Cnfirmatin Cde). FHA claim infrmatin is reprted t CAIVRS fr 36 mnths after a claim is paid. If the brrwer has a delinquent Federal debt r has had a claim paid n a Federally insured lan, use the telephne referral number prvided by CAIVRS t cntact the ffice respnsible fr the reprted debt. If the CAIVRS message is errneus with respect t an FHA insured lan, use the telephne referral number prvided by CAIVRS t cntact the apprpriate HUD Hmewnership Center (HOC) fr instructins r dcumentatin t supprt the brrwer's eligibility. Cntact the Credit Alert Crdinatr at the HOC if there is a Scial Security Number errr. Fr an errneus message reprted by anther Federal agency, cntact the agency at the phne number prvided by CAIVRS. Each file submitted t RMS fr underwriting must include a CAIVRS print ut fr each Brrwer n the lan. The CAIVRS reprt may nt be lder than 90 days at the time f underwriting and 120 days at clsing. T run a CAIVRS search, fllw these steps: 1) G t and lgin t FHA Cnnectin 2) Click n Single Family FHA 3) Click n Single Family Originatin 4) Click n Case Prcessing 5) Click n CAIVRS Authrizatin 6) On the CAIVRS Authrizatin page, select the type f identificatin fr the brrwer frm the SSN/TIN Indicatr drp-dwn list in the Brrwer field. 7) Type the brrwer s ID in the SSN/TIN Number bxes. Yu can use the Tab key t g t the next bx. 8) Repeat steps 1-2 fr each c-brrwer, entering the infrmatin in the apprpriate Cbrrwer fields. Otherwise, be sure N/A is selected n the SSN/TIN Indicatr drpdwn list fr each c-brrwer nt included. 9) Type the unique 10-character ID assigned t the lender by the agency (and prgram) in the Lender ID field. Fr example, fr an FHA Single Family insured lan, type the FHA ID f the Title II lender. a. Nte: The lender must be authrized fr the agency (and prgram) selected and the Lender ID must match the selectin. Revised 03/2014 Page 23

24 10) Frm the drp-dwn list in the Agency field, select the agency (and prgram) thrugh which the brrwer is seeking a lan. 11) Click Send - If prcessing was successful, the CAIVRS Authrizatin Results page appears with a Success message near the tp f the page stating: CAIVRS Authrizatin Successfully Cmpleted. 12) Print the screen that shws the results f yur search If there is any Federal debt in default r freclsure, r if there has been a claim paid by the reprting agency within the last three (3) years, the Applicant is nt eligible fr a HECM. Gvernment agencies include but are nt limited t Federal Agencies, the Department f Educatin and the Veteran s Administratin. See als Freclsures sectin f this Guide fr additinal infrmatin. EPLS and LDP The Excluded Parties List System (EPLS) and Limited Denial f Participatin (LDP) are web-based systems that identify parties excluded frm receiving federal cntracts and certain types f federal financial and nn-financial assistance and benefits. These systems help t determine if a ptential Brrwer is eligible fr a reverse mrtgage. Files submitted t underwriting must include search results printuts frm bth f these prgrams. Fr EPLS searches, prceed with the fllwing steps: 1) G t 2) Click n Search Recrds field 3) In the search field, enter the name yu wish t search. 4) Click n Search at the bttm f the page; Revised 03/2014 Page 24

25 5) Print the screen that shws the results f yur search. Fr LDP searches, prceed with the fllwing steps: 1) G t 2) In the search field, enter the name yu wish t search. Fr individuals, enter Last name, First Name (i.e. Smith, Jhn); fr cntractrs, just enter the cmpany name (partial names are k - i.e. Mr. Bugs); 3) Click n Search by Name; 4) Print the screen that shws the results f yur search. An Applicant wh is suspended, debarred, r therwise excluded frm participatin in the HUD s prgrams is nt eligible fr a HECM. If the name f any party t the transactin appears n either list, the applicatin is nt eligible fr mrtgage insurance, and RMS will decline the applicatin. Please nte: We require a search f the EPLS and LDP databases fr all individuals* r cmpanies wh are invlved in the HECM lan transactin. *This includes all Lender staff handling the lan file including lan riginatr, prcessr, underwriter, and clser/funder. Revised 03/2014 Page 25

26 Credit Reprts and Dcumentatin A tri-merge credit reprt which includes a public recrd search is required with every submissin. In additin, a fraud check such as Tru-Alert must be included. Credit Reprts can be rdered frm the Krll Factual Data website amng thers: A single reprt is acceptable fr married cuples. Nn-married multiple Brrwers require individual credit reprts. In the case f a nn-brrwing spuse, a separate credit reprt must be btained. See als Nn-brrwing Spuses f this Guide fr additinal requirements. A credit reprt is valid fr 120 days. The credit reprt must evidence the crrect brrwer name, date f birth and scial security number. Any additinal scial security numbers linked t ur brrwer(s) n the credit reprt must be researched. Child Supprt Liens fr delinquent child supprt will have t be paid in full r subrdinated t the HECM lan if they are a lien against the prperty. If the child supprt lien is a federal lien, it must be paid in full/satisfied at r prir t clsing. Outstanding Mrtgages All utstanding mrtgages must be paid ff n the prperty being used as cllateral fr the reverse mrtgage. If there is a mrtgage n anther prperty, yu must btain prf r dcumentatin, which can be a cpy f the deed, mrtgage cupn bk, letter frm the mrtgage cmpany, r any ther dcumentatin acceptable t the Underwriter. If there are any liens less than a year ld n the credit reprt, the title cmpany must cnfirm that this lien is nt against the hme. (This is because sme cunties are behind in their recrding.) Fr Traditinal HECM s, the Brrwer may be currently delinquent n anther mrtgage and Revised 03/2014 Page 26

27 may nt need t be brught current prir t clsing at Underwriter discretin; hwever, they will need t prvide a Letter f Explanatin t explain the circumstances behind the delinquency. Fr HECM fr purchase lans, the Brrwer must bring the ther mrtgage current prir t clsing. Tax Liens All Federal tax liens and thse secured by ur subject prperty must be paid ff at clsing, r a Certificate f Release prvided unless a satisfactry repayment plan is made between the brrwer and the agency wed and is verified in writing. A current payff statement must be prvided if the lien is t be paid in the HECM clsing. See als Delinquent Federal Debt sectin belw. If a repayment plan has been established, RMS will require written prf that the plan is in place fr at least 6 mnths and that the payments are current. If the delinquent bligatin is a lien n title, a subrdinatin agreement t subrdinate the lien t the first and secnd HECM liens is required If the IRS will nt prvide an acceptable subrdinatin agreement, the federal tax lien must be paid in full at clsing. If the debt is t be paid in clsing with the HECM prceeds, a payff statement and HUD-1 shwing the disbursement is required as prf that the federal debt has been satisfied. Federal tax liens shwing as pen n credit must be paid in full at clsing r prf f release is required. Acceptable dcumentatin t cnfirm release is limited t the fllwing: Certificate f Release Frm 668(z) Zer demand frm issuing authrity AND credit supplement shwing lien status as released Statement n letterhead frm the issuing federal authrity cnfirming n balance due AND credit supplement shwing lien status as released. The letter must include the fllwing references: Brrwer Name Brrwer SSN r Tax Id Tax Filing Year(s) referenced Dcket / Serial Number f Original Lien Filing Statement cnfirming lien has been satisfied in full and released Signature f issuing authrity representative Name, title and cntact infrmatin fr party signing n behalf f issuing authrity Student Lans All delinquent student lans must be brught current, paid ff r therwise satisfied, r a satisfactry written repayment plan must be in place between the Applicant and the Federal agency wed the debt. If a repayment plan has been established, RMS will require written prf that the plan is in place fr at least 6 mnths and that the payments are current. If the lan is t be paid ff at clsing, a current pay-ff statement must be prvided in the submissin file. If there is a deferral agreement in place, a cpy must be prvided. See als Delinquent Federal Debt sectin belw Bankruptcies Chapter 7 r Chapter 11 Bankruptcies must be discharged r dismissed. If the credit reprt says that the bankruptcy was dismissed r discharged ver a year ag, n additinal dcuments are required. Revised 03/2014 Page 27

28 If it was dismissed r discharged less than a year ag, r if the credit reprt des nt shw a dismissal, a curt rder signed by the judge r a credit supplement evidencing the discharge/dismissal may be submitted as prf f the discharge r dismissal. Chapter 13 Bankruptcies have 2 ptins: The Brrwer may pay the bankruptcy ff at the clsing. Obtain a payff letter frm the bankruptcy trustee. The Brrwer may cntinue with the bankruptcy and the reverse mrtgage. The Brrwer still has t pay ff any liens against the prperty, and any federal debt. Obtain a written permissin frm the curt signed by the judge, indicating that the lender may cntinue with the reverse mrtgage withut paying ff the bankruptcy. When btaining the permissin, make sure that it specifies that the mrtgage will be an adjustable rate reverse mrtgage, if applicable. Ask the curt nt t specify a rate. Apprval shuld either be at current market rates r the current index plus a stated percentage. (E.g. LIBOR plus 3.25%) Otherwise, if the rate allwed by the curt is less than the current rate at clsing, we cannt clse the lan. In the state f Califrnia: The trustee apprval must include the curt decree t lift the autmatic stay t permit the recrding f the security instruments fr brrwers currently in Chapter 13 bankruptcy. RMS must have the Trustee Payff letter r the statement frm the judge prir t clsing. Freclsures We will clse any lan in freclsure, as lng as it meets the ther lan requirements. The status f the freclsure des nt matter, as lng as the freclsure is nt cmplete. We will RUSH underwrite a file in freclsure. Please ntify Intake at SubmissinsEast@RMPath.cm r SubmissinsWest@RMPath.cm prir t sending the file, and indicate RUSH in the file cmments. Include prf f freclsure. Als, add a cmment indicating that the Brrwers are in freclsure, and include the date f the scheduled freclsure sale. Previus Mrtgage Freclsure A brrwer whse previus principal residence r ther real prperty was freclsed n, had a shrt sale cmpleted r has given a deed-in-lieu f freclsure within the previus three years n a Gvernment lan is nt eligible fr a new FHA-insured mrtgage. Hwever, if the freclsure/deed-inlieu r shrt sale was n a Cnventinal lan and was the result f dcumented extenuating circumstances that were beynd the cntrl f the brrwer, the brrwer may be eligible fr a HECM lan at Underwriter discretin. Please nte: The minimum 3-year perid ends n the Clsing date f the new lan, and starts n: -the date the claim was paid fr a gvernment lan; r -the date the freclsure was cmpleted fr a nn-gvernmental lan Shrt Sales A brrwer is nt eligible fr a new FHA-insured mrtgage, including HECM, if he/she pursued a shrt sale agreement n his/her principal residence simply t take advantage f declining market cnditins, and purchase a similar r superir prperty within a reasnable cmmuting distance at a reduced price as cmpared t current market value. Revised 03/2014 Page 28

29 Brrwer Current at the time f Shrt Sale A brrwer is cnsidered eligible fr a new FHA-insured mrtgage if all mrtgage payments n the prir mrtgage were made within the mnth due fr the 12-mnth perid preceding the shrt sale. Brrwer in Default at the time f Shrt Sale A brrwer in default n his/her mrtgage at the time f the shrt sale (r pre-freclsure sale) is nt eligible fr a new FHA-insured mrtgage fr three years frm the date f the pre- freclsure sale. Exceptin: RMS will cnsider exceptins based n extenuating circumstances as detailed abve in Previus Mrtgage Freclsure. Nte: A brrwer wh sld his/her prperty under FHA s pre-freclsure sale prgram is nt eligible fr a new FHA-insured mrtgage frm the date that FHA paid the claim assciated with the pre-freclsure sale. Judgments Judgments must be paid ff at clsing if they are a lien against the prperty securing the reverse mrtgage. The title cmpany can verify liens and judgments n the prperty. Prf f the status f all judgments is required. The underwriter may require evidence f satisfactin r payment arrangements. Delinquent Federal Debt If the brrwer is presently delinquent n any Federal debt (e.g. VA-guaranteed mrtgage, HUD Sectin 312 Rehabilitatin lan r Title I lan, Federal student lan, Small Business Administratin lan, delinquent Federal taxes, etc.) r has a lien, including taxes, placed against his r her prperty fr a debt wed t the United States, the brrwer is nt eligible until the delinquent accunt is brught current, paid r therwise satisfied, r a satisfactry repayment plan is made between the brrwer and the Federal agency wed and is verified in writing. The Brrwer may pay ff any delinquent Federal debt with HECM prceeds regardless if it is a lien n title. Any delinquent Federal debts r liens against the real estate must nt be in excess f the mrtgagr s net principal limit, unless the mrtgagr has a separate surce f funds frm which t draw and pay thse debts. If a repayment plan has been established, RMS will require written prf that the plan is in place fr at least 6 mnths and that the payments are current. If the delinquent bligatin is a lien n title, a subrdinatin agreement t subrdinate the lien t the first and secnd HECM liens is required If the IRS will nt prvide an acceptable subrdinatin agreement, the federal tax lien must be paid in full at clsing. If the debt is t be paid in clsing with the HECM prceeds, a payff statement and HUD-1 shwing the disbursement is required as prf that the federal debt has been satisfied. Acceptable dcumentatin t cnfirm release is limited t the fllwing: Certificate f Release Frm 668(z) Zer demand frm issuing authrity AND credit supplement shwing lien status as released Statement n letterhead frm the issuing federal authrity cnfirming n balance due AND credit supplement shwing lien status as released. The letter must include the fllwing references: Revised 03/2014 Page 29

30 Brrwer Name Brrwer SSN r Tax Id Tax Filing Year(s) referenced Dcket / Serial Number f Original Lien Filing Statement cnfirming lien has been satisfied in full and released Signature f issuing authrity representative Name, title and cntact infrmatin fr party signing n behalf f issuing authrity Fld Certificatin Fld Certificates can be rdered frm a number f surces, including Krll Factual Data and CreLgic at the fllwing website: Fld Zne Mapping and Cmmunity Participatin All Fld Certificates shuld have the Natinal Fld Insurance Prgram (NFIP) map number and date cmpleted (see example belw). Revised 03/2014 Page 30

31 When an area has nt been mapped, r if NFIP is nt available, the fllwing chart may be used t verify if a prperty is eligible: Mapping (Refer t Bx 1, 2, 5) Fld Zne (Refer t Bx 4) NFIP Participatin (Refer t C1 and C2) Mapped In a fld zne NFIP Available Eligible Prperty Eligible? Mapped In a fld zne NFIP NOT Available Ineligible Mapped NOT in a fld NFIP NOT Available Eligible zne Nt Mapped Undetermined NFIP Available Lender Discretin Nt Mapped Undetermined NFIP NOT Available Manufactured: Ineligible Stick-built: Lender discretin The Underwriter will review the fld zne and fld insurance availability sectins n every fld certificate. If the prperty is lcated within a SFHA and the Natinal Insurance Prgram (NFIP) is nt available within the cmmunity, the prperty is nt eligible. If the chart abve indicates Lender Discretin the underwriter will review the area fr lcal bdies f water, annual rain fall, last fld, and availability f NFIP cverage t determine if the prperty is eligible. Fld certificatin must be fr Life-f-Lan cverage and reflect RMS as Lender if clsing in ur name. Our servicing address as: Reverse Mrtgage Slutins, Inc Spring Creek Rad Spring, TX If prperty is in a special fld hazard area, indicated by Fld Znes cntaining the letters A r V, fld insurance is required. Please see Fld Insurance sectin fr additinal infrmatin. Revised 03/2014 Page 31

32 Preliminary Title Cmmitment Each submissin package must include a preliminary title cmmitment. RMS may apprve ne r mre Title prviders. Premier Reverse Clsings is an RMS preferred vendr and rders may be made n their website lcated at: PLEASE NOTE: All L3 Spnsred Originatrs must utilize Title/Settlement Agents frm ur Apprved Prvider list within 30 days f submitting their first lan t RMS fr underwriting. All L5 Crrespndents perating under a Principal/Authrized Agent relatinship must utilize Title/Settlement Agents frm ur Apprved Prvider list OR submit a request t add a preferred vendr t ur Apprved Prvider list within 30 days f submitting their first lan t RMS fr underwriting. Data frm the preliminary title cmmitment shuld be entered int RMCmpass sftware. Title shuld prvide cmmitments in a frmat that allws fr prcessrs t cpy and paste legal descriptins directly int RMCmpass t avid typgraphical errrs. We require a title cmmitment that includes the fllwing: Date f issue: The Date f Issue must nt be lder than 120 days at the time f clsing. Crrect prpsed insurance amunt: The minimum amunt f title insurance cverage required is the maximum claim amunt. Crrect prpsed insured: The prpsed insured shuld be Reverse Mrtgage Slutins, Inc. ISAOA/ATIMA unless the Whlesale Partner clses in their wn name. Crrect vesting: Vesting must be in the brrwer(s) name nly/ Cpy f mst recent Warranty Deed/Quit Revised 03/2014 Page 32

33 Claim/Grant Deed may need t be prvided by Title t insure the current vesting f subject prperty. See als Vesting heading belw. Prperty address Legal descriptin f the prperty The legal descriptin must match the legal descriptin n the Appraisal. Tax search Tax Certificate must be current and indicate crrect name/address Liens & Judgments All liens n title must be paid ff, r a satisfactry Subrdinatin Agreement must be prvided. See als Subrdinatin Sectin. Outstanding mrtgages The title cmmitment is cnsidered expired after 120 days. The vendr must issue a new and updated title cmmitment befre clear t clse will be issued. Vesting Vesting shuld be in fee simple r leasehld and include nly thse eligible fr and part f the reverse mrtgage transactin. Any nn-brrwers must be remved frm title. If we are remving anyne frm title, the title cmpany must verify the final vesting and prvide us with a draft f the crrective vesting dcument. If vesting shws a Living Trusts, r Life Estates, please read the apprpriate heading. If vesting shws a deceased spuse, please refer t the Death Certificates heading. Check fr Nn-brrwing Spuses and refer t that heading if applicable. This applies whether the spuse is n title r nt. Hmes vested in a Family Limited Partnership are nt accepted. Address Prperty address and legal descriptin must match the Appraisal, Case # Assignment, USPS and Hazard/Fld Insurance Plicies. Check fr Leasehlds, Cndminiums and C-ps, and Planned Unit Develpment PUD. Additinal lts r acreage n the title that was nt included n the appraisal shuld be remved frm title. If the additinal lts r acreage cannt be divided, an excessive land certificatin must be executed. Please see als the Rural, Agricultural and Excess Acreage heading. Taxes, Liens and Payffs All taxes, liens, judgments, and utstanding mrtgages listed n the title must be paid ff r remved frm title cmmitment at clsing. The nly exceptin is a lien that is t be subrdinated. Fr mre infrmatin, see Subrdinatin and Credit Reprts and Dcumentatin headings. Updated payffs fr all items t be paid at clsing are required prir t final apprval Prjected funding date shuld be within the effective dates f the payff letter. If the payff statement has expired, we will require a letter frm the clsing agent acknwledging acceptance f the per diem, and stating that they will be respnsible fr any payff deficiency if there is a shrtfall. The payff amunt shuld be calculated at least 10 days past the expected funding date. Revised 03/2014 Page 33

34 At a minimum, taxes due within the next 60 days must be paid prir t r at clsing. The settlement agent and/r Brrwer may chse t cllect payment fr additinal taxes at their discretin. If the title shws an existing HECM lan, see HECM t HECM Refinance Transactin heading. If Brrwer currently has a prperty tax deferral thrugh the lcal taxing authrity, the deferral prgram must be cancelled, and cannt be reinstated. All utstanding amunts due must be paid ff in clsing. Surveys We require survey cverage at clsing n every lan. This means that we will never allw any survey exceptins t remain n the final title plicy. In mst states, the title cmpany will autmatically prvide this cverage withut a survey. Typically, Brrwers in Texas, Flrida and New Mexic will need a survey in rder t btain survey cverage. Even in Texas, Flrida, and New Mexic new surveys are nt always necessary. In sme cases, the Brrwers may have an ld survey n file, and the title cmpany will accept the ld survey. In ther cases, title cmpanies will prvide survey cverage withut requiring a new survey. The title cmpany is the final authrity determining whether t apprve survey cverage withut a new survey. All pertinent data frm title cmmitments must be entered int RMCmpass t facilitate the Underwriting, Clsing and Funding prcesses. Title & Settlement screens cntain critical data necessary t prduce final lan dcuments and clsing instructins, including: Final vesting Legal descriptin, r shrt legal Title Cmpany Settlement Agent (if different frm Title Agent) Trustee Infrmatin, if applicable Nte: If the subject prperty is in a Deed f Trust state, a Trustee is required fr prper cmpletin f the security instrument. This shuld be entered in the set-up area by the Cmpany Administratr, but if missing can be entered at the lan level in Brrwer Cntacts. Special Title and Vesting Circumstances Leasehlds Prperty held under a lease is eligible fr an FHA reverse mrtgage if the lease meets HUD guidelines. A leasehld ccurs when the land is nt wned by the Brrwer but by anther party under a lease agreement. The underwriter will review the lease t ensure that it meets FHA guidelines: Leasehld Requirements: 1. A cpy f the full lease agreement is required and all infrmatin cntained in the lease must be legible Revised 03/2014 Page 34

35 2. The lease must be n less than 99 years and renewable r have a remaining term nt less than 50 years past the 100 th birthday f the yungest brrwer. 3. The brrwer(s) is the lessee n the grund lease 4. The lease may nt cntain restrictins f assignability Leases may nt cntain restrictins f assignability such as assignment by way f mrtgage r assignment t r by the Federal Husing Administratin r Department f Veterans Affairs r upn freclsure, nr withhld cnsent fr assignment because f the assignee s natinal rigin, race, clr r creed s lng as the leasehld is cvered by an insured mrtgage r a mrtgage held by the Secretary r s lng as the Secretary wns the leasehld. 5. The lease must permit the prperty t be mrtgaged and must nt cnflict with the term f the mrtgage 6. The mrtgage is secured by the brrwer s wnership f the subject prperty, including the leasehld interest in the grund lease. 7. The lease must prvide that wnership f bth the fee simple title and the leasehld estate by the same wner will nt affect a merger f such estates while either estate is encumbered by a mrtgage, withut the written cnsent f the mrtgagee. 8. The leasehld agreement des nt include any default prvisin that culd result in frfeiture r terminatin f the lease, except fr nnpayment f the grund lease rents. 9. The mrtgagee must have a right t crrect defaults within 120 days frm receipt f ntice t terminate the lease because f such default, r such further time as may be necessary t cmplete freclsure. 10. The agreement prvides that the brrwers pay taxes, and insurance, if applicable, tward the land any imprvements. 11. There is n first right f refusal. 12. The leasehld is in full frce and effect and is nt subject t any prir lien r encumbrance by which the leasehld culd be terminated r subjected t any charge r penalty. 13. The lease (including all amendments) is recrded and n party is in any way in breach f any prvisin f the lease r amendment. 14. The lease must prvide prtectin f the mrtgagee s interest in the event f a prperty cndemnatin. 15. The lease must allw fr an ptin t purchase. a. The lease must permit lessee r assigns t purchase fee simple title frm lessr r assigns with 30 day written ntice. b. The lease must permit purchase at a price nt t exceed the riginal valuatin f the lease fee. c. Buyer and seller may agree that this right shall nt be exercised during the first 5 years f the lease term. (Fr exceptins see Sectin 6 31 HUD Handbk , Rev. 1 Chapter 6). Grund Rent Grund rent is established in the lcal market place hwever the annual rental may nt exceed the lesser f either f the fllwing: 1. 12% f the site value. 2. The mrtgage interest rate at the time f underwriting, less 2 %, X the site value. Grund Rent may increase peridically subject t the fllwing: Rent may nt be increase fr the first 3 years f the lease term and subsequent rent increases May ccur nt mre than nce every 12 mnths. Revised 03/2014 Page 35

36 Increase must be stated in the lease dcument in exact dllar amunts. Establishment f future rentals by negtiatin r by frmula is nt permitted. Increases in any 12 mnth perid may equal n mre than 2 % f HUD s riginal site valuatin, but at n time may annual grund rental exceed 12 % f HUD s riginal site valuatin. (See Chapter 6 paragraph 32 fr example) Leasehlds that d nt meet abve requirements 1. A leasehld addendum/amendment shuld be prepared by title t eliminate r amend any deficiencies. The brrwers and grund rent wners must sign the addendum/amendment and we must have evidence f recrdatin f the updated lease with any amendments/addendums. a. Nte: The lease and all amendments must be recrded prir t clsing. 2. The leasehld must be bught ut and the final title plicy shuld reflect the buyut f the leasehld and evidenced by a Fee Simple Warranty Deed. a. Nte: All buyuts must be cmpleted and recrded prir t clsing. The preliminary title cmmitment and appraisal must reflect fee simple. Life Estates Leasehld Appraisals The value f the prperty is established as thugh it were wned in fee simple and unencumbered by a lease. The value f the leased fee is then determined and deducted frm the estimated value f the unencumbered prperty. The resulting difference is accepted as the value f the leasehld estate. The appraiser must be prvide with a cpy f the lease agreement which details the terms, cnditins and restrictins f the grund lease and they must cmment n any effect the terms f the lease have n value and marketability. 1. The appraiser must first arrive at an estimate f value fr the subject prperty in fee simple. 2. Therefre any leasehld estate cmps prvided must have an adjustment adding back the leased fee t the sales price t arrive at the fee simple value. This will require the appraiser t check the annual grund rent fr each leasehld cmparable. 3. Once the fee simple value is determined the leased fee is determined by the annual rent divided by the capitalizatin rate and deducted frm the fee simple value this determines the value f the leasehld estate. 4. The appraiser enters the value f the leased fee n the back f the URAR in the COST sectin by lining ut the wrds ESTIMATED SITE VALUE AND WRITING IN LEASED FEE. The value in fee simple is still shwn belw n the line fr INDICATED VALUE BY SALES APPROACH and just belw n the line fr Final Recnciliatin f Appraisal. The appraiser shuld write in SUBJECT ON LEASED LAND WITH ANNUAL RENT OF $ CAPITALIZED AT % = $ Leased Fee. Under Recnciliatin n the line fr final estimate the wrd Market shuld be lined ut and replaced with the wrd leasehld s it reads, I estimate the value f the Leasehld Estate as defined f the subject prperty and the value f the Leasehld Estate shwn at the end f that line. (See Chapter 6 paragraph 33 fr further details r samples depending n length f term) A prperty held in a life estate is eligible fr an FHA reverse mrtgage. A life estate is an interest in real prperty allwing the wner f the life estate t use the Revised 03/2014 Page 36

37 prperty during his r her lifetime. On the death f the wner f the life estate, his r her rights in the prperty cease, leaving a fee simple title t the prperty in the hlders f the future interest in the prperty. The Brrwer and all hlders f any future interest in the prperty must execute the deeds at clsing. Hlders f future interest d nt execute the nte r lan agreement. Please nte: RMS requires that all remaindermen and persns hlding a reversinary interest in the prperty be cunseled. The remainder/reversinary interest must be an individual and may nt be a trust r LLC. Subrdinatin Subrdinatin means that a lender is taking third psitin t the HECM lan (behind RMS and HUD). HUD has been very clear regarding the creatin f a new financial bligatin in relatin t the reverse mrtgage transactin. Such transactins are NOT allwed. Existing liens against the subject prperty, excluding first mrtgage liens, may be subrdinated prvided they meet the fllwing requirements: If the prceeds frm the HECM are sufficient t cver the payff f a frward lan, the brrwer must satisfy the lien either by using the HECM prceeds t pay it in full r btaining a satisfactin frm the Lender. The custmer cannt take ut a lien in rder t cver shrt funds at clsing. Title must evidence the lien was recrded prir t applicatin. Recently recrded liens may be subject t further restrictins. The current lender must be willing t subrdinate t the third lien psitin behind the Lender (RMS) and HUD. The brrwer may nt subrdinate a mrtgage r deed f trust that is currently in first lien psitin. The brrwer may nt subrdinate a revlving line f credit. RMS may require the brrwer t satisfy unpaid r lcal curt-rdered judgments befre clsing at the underwriter s discretin. Liens against the subject prperty that resulted frm utstanding state r lcal curt judgments must be satisfied and remved, r subrdinated t the HECM first and secnd liens at clsing. Federal judgments r debts must be paid in full befre clsing, r have a satisfactry repayment plan, even if they are nt attached t the subject prperty. Subrdinatin Agreement Subrdinatin Agreements require Underwriter Apprval prir t clsing. Tw subrdinatin agreements must be prepared by the current lender evidencing 150% f the maximum claim amunt. One f these subrdinates t the reverse mrtgage lender, and the ther subrdinates t U.S. Department f Husing and Urban Develpment (HUD). The riginal subrdinatin agreements must be recrded by the current lender r recrded at clsing by the title cmpany. A cpy f the recrded Agreements must be kept in the file. Death Certificates A certified cpy f the death certificate is required if smene with wnership interest n the prperty (and named n the title) is deceased and needs t be remved frm the title. This includes any persn named in a trust wh is deceased. Revised 03/2014 Page 37

38 Each state has different laws abut remving deceased persns frm title. An affidavit f death may als be required, based n state requirements. The title cmpany must cnfirm that the deceased party can be remved frm title at the clsing withut prbate. Nn-brrwing Spuses Effective with applicatins taken n r after Nvember 1, 2013, Reverse Mrtgage Slutins, Inc. will n lnger clse, fund r purchase lans that have a Nn-Brrwing Spuse. Exceptins t this rule are limited t: 1. Nn-Brrwing Spuses wh have never been n title and d nt have any cmmunity prperty rights t the prperty OR 2. Nn-Brrwing Spuses wh can prve they d nt ccupy the prperty and d nt have any cmmunity prperty rights t the prperty. If the lan qualifies fr ne f the abve exceptins, all ther Nn-Brrwing Spuse Guidelines will apply. Nn- Brrwing Spuses are nt eligible fr HECM fr Purchase transactins (abve exceptins d nt apply). Nte: Fr brrwers in Puert Ric, RMS will nly accept Nn-Brrwing spuse transactins when the Nn- Brrwing spuse has never been n the title t the hme AND where the primary brrwer has a prenuptial agreement in place that specifies that the nn-brrwing spuse has n interest/rights in the prperty and the prperty is the sle pssessin f the primary brrwer. Underwriting Guidelines fr NBS Exceptins: If an exceptin is granted, RMS requires the fllwing frm a nn-brrwing spuse: All nn-brrwing spuses must be cunseled A separate credit reprt is required n all nn-brrwing spuses The Brrwer and nn-brrwing spuse must sign the "Ntice t Nn-Brrwing Spuse r Resident" disclsure, preferably at applicatin stage. The Ntice t Nn-Brrwing Spuse r Resident replaces all previus frms, including the Hmestead Advisry and Divestiture f Interest frms. In signing this frm, the nn brrwing spuse acknwledges that he/she is aware f the pssibility they may be required t vacate the prperty in the event f the Brrwer's death r inability t ccupy the prperty. Because each state's laws are different, (e.g., with sme states having cmmunity prperty laws and thers having hmestead laws) the title cmpany will be the definitive surce regarding any and all state specific dcuments that must be executed. The prper dcuments must be executed at clsing t ensure that any rights f the nnbrrwing spuse have been prperly extinguished. Typically this will mean that the spuse will have t sign the Deed r Mrtgage dcuments, Ntice f Rescissin and Truth-in- Lending frm at clsing. Clsing Instructins shuld include requirements fr the Title Cmpany t prepare the necessary state specific dcuments t be executed at clsing. Imprtant: If any instrument extinguishing the nn-brrwing spuse's interest is required t be Revised 03/2014 Page 38

39 recrded under applicable state law, the instrument must be recrded befre the new Mrtgage r Deed f Trust is recrded. Legally Separated Spuses HUD guidelines d nt state whether r nt a HECM lan can be made if the Brrwer and his r her spuse are legally separated. Until HUD clarifies this, a ntarized written statement frm the nn-resident spuse shuld be btained cvering the fllwing pints: That the parties are separated and have been since [the perid shuld be n less than 1 year] and their separatin is permanent. That the parties d nt share marital r cmmunity prperty and live separate and apart. That the nn-resident spuse des nt live in the prpsed security prperty and has n claim t such prperty. Additinal dcumentatin may be required t supprt nt-ccupant status at the Underwriter s discretin That the nn-resident spuse acknwledges that the prpsed security prperty is the separate prperty f the resident spuse. That the nn-resident spuse acknwledges and cnsents t the prpsed reverse mrtgage transactin. We will cntinue t require the Ntice t Nn-Brrwing Spuse r Resident Disclsure frm the nn-resident spuse. If the interest n the nn-resident spuse has been prperly extinguished the cunseling requirement may be waived, at the discretin f the DE underwriter. Pwer f Attrney A Pwer f Attrney has the right t sign fr and make decisins fr the Brrwer. POA Dcument The pwer f attrney dcuments must meet certain requirements: Durable (cntinues in effect if the Brrwer becmes incmpetent) Nte: Pwer f attrney in the state f Luisiana is autmatically durable as per the state civil cde. Give the right t encumber the prperty Executed by a cmpetent Brrwer Executed by the Brrwer prir t the date f applicatin Can be revcable r irrevcable; hwever if revcable, the POA must: 1. prvide a specific expiratin date that is at least 90 days after clsing, r 2. state that it is revcable nly by a written revcatin recrded in the real prperty recrds f the subject cunty and the clsing agent has cnfirmed that n such revcatin has been recrded The title cmpany must cnfirm in writing that they will be able t clse the transactin using this pwer f attrney and that the POA paperwrk meets state guidelines. RMS requires the Attrney-in-Fact t execute a POA Affidavit. Applicatin, Cunseling & Cmpetency The Lan Officer must cnfirm the POA s identity and Scial Security Number using the Patrit Act Disclsure. This dcument must be signed by the party verifying identity. The Pwer f Attrney (POA) must attend cunseling. Revised 03/2014 Page 39

40 If the Brrwer is cmpetent, the Brrwer must Sign the initial applicatin (1009) and HUD 92900(a) Attend cunseling and sign the cunseling certificate Prvide a letter f explanatin indicating the reasn they are having the POA sign n their behalf If the Brrwer is using a POA at Clsing, but did nt at applicatin, the Brrwer must: Prvide a letter f explanatin indicating the reasn they are nw using the POA. Depending n explanatin, ther cnditins may apply If the Brrwer is incmpetent: The POA must prvide prf that the Brrwer is incmpetent. This is typically a dctr s letter explaining the nature f the incmpetency and when it began. The Brrwer must have executed the pwer f attrney when the Brrwer was still cmpetent. Cases where the Brrwer is cmpetent t understand the lan, but is physically unable t attend cunseling, will be decided n a case-by-case basis by the underwriter. Whenever pssible, the Brrwer will be required t attend cunseling. TTD cunseling is available fr deaf Brrwers. If a pwer f attrney is present at the cunseling sessin, the persn s name designated as the client s POA must be included n the frm HUD-92902, Certificate f HECM Cunseling, and the POA must sign the certificate. EPLS & LDP The EPLS and LDP lists must be checked fr the Attrney-in-Fact, just as fr the Brrwer. Please see EPLS and LDP sectin fr instructins. Signing The pwer f attrney must sign all lan dcuments and attend cunseling and the clsing. On the applicatin and clsing dcuments, the POA s signature must fllw the guidelines laid ut in the POA dcument. A typical example: [Brrwer s full name] by [POA s full name] as Attrney in Fact. That is, Jane Smith by Jhn De as Attrney in Fact At Clsing At clsing, the Attrney in Fact must certify that the Brrwer is alive and that that the pwer f attrney is in effect. Guardian r Cnservatr A Guardian (called a Cnservatr in sme states) is appinted by a curt t prtect the Brrwer s interest because the Brrwer has becme incmpetent and has nt written a durable Pwer f Attrney. Guardianship Dcument The fllwing dcuments must be included in the file if the Brrwer has a guardian: A cpy f the curt rder appinting the persn as guardian r cnservatr. A curt rder t state that the curt apprves the lan transactin fr a HECM reverse mrtgage. The wrds reverse mrtgage and/r adjustable rate, negative amrtized lan must be included in the curt rder Revised 03/2014 Page 40

41 The curt rder must be signed by the judge. The curt rder shuld nt include any interest rate r lan amunt. If an interest rate is listed, it must be stated as an "initial rate" nting that it is an adjustable rate fr a negative amrtized lan. If a lan amunt is listed, it must nt be less than the prpsed recrded deed amunt, which equals ne and a half times the maximum claim amunt. If the prperty is in a trust, the curt rder will als need t authrize the trustee t act n behalf f the trust. The title cmpany must cnfirm in writing that they will be able t clse the transactin using the Cnservatr r Guardianship paperwrk. Applicatin, Cunseling & Cmpetency The Lan Officer must cnfirm the Guardian/Cnservatr s identity using the Patrit Act Disclsure frm. The Guardian/Cnservatr must attend cunseling. Since the Brrwer is incmpetent, he r she des nt have t attend cunseling. EPLS and LDP EPLS and LDP must be checked fr the Guardian/Cnservatr, just as fr the Brrwer. Please see EPLS and LDP sectin fr instructins. Signing Dcuments On the applicatin and clsing dcuments, the guardian s r cnservatr s signature must fllw the guidelines laid ut in the Guardianship Dcuments. A t ypical example: [Brrwer s full name] by [Guardian s full name] as [Guardian/Cnservatr]. That is, Jane Smith by Jhn De as Guardian Or, Jhn Smith by Jane Jnes as Cnservatr Living Trusts General Trust Guidelines HUD will insure HECMs n prperty held in the name f an inter vivs r living trust. Trusts must meet the fllwing guidelines: It is RMS plicy t never suggest r recmmend remval f the Brrwer s prperty frm a trust. If the trust des nt meet RMS requirements, the Brrwer shuld nly be tld in what way the trust des nt meet RMS requirements. If the hme is put back int a trust after clsing, the trust must meet the same requirements that it must meet befre clsing. A Trust Acknwledgment is required n all transactins clsing in a trust acknwledging the reverse mrtgage lien is being placed n the subject prperty in trust. If the Brrwers are remving the prperty frm the trust, they will need t sign the Trust Acknwledgment stating that they understand this. The trust must be recrded and accurately shwn in the vesting n the title cmmitment. Hazard Insurance shuld be in the Brrwer s name r in the same name in which the title is vested. Under the HECM prgram, all Brrwers must be Beneficiaries f the trust. The Brrwer(s) may r may nt be Trustee(s) f the trust; hwever, if they are, they must sign the required dcuments as bth Brrwer and Trustee. See Trust Items Signed at Revised 03/2014 Page 41

42 Clsing fr specific detail. Revcable Trusts A revcable trust is ne that: An individual created during his r her lifetime, Becmes effective during its creatr s lifetime, and Can be changed r cancelled by its creatr at any time, fr any reasn, during that individual s lifetime. Nte: The revcability f sme trusts may change n the death f ne Brrwer. Irrevcable Trusts An irrevcable trust cannt be changed r cancelled nce it is set up withut the cnsent f the beneficiary. An irrevcable trust is an arrangement in which the grantr permanently departs with the wnership and cntrl f the prperty. Land Trusts A land trust prvides a unique frm f wnership f real prperty. In an Illinis land trust, the legal and equitable title lies with the trustee and the beneficiary retains what is referred t as a persnal prperty interest. The beneficiary has the exclusive pwer t direct r cntrl the trustee in dealing with the title and the exclusive cntrl f the management, peratin, renting and selling f the trust prperty tgether with the exclusive rights t the prceeds frm the prperty. The nly pwer the trustee has in relatin t the land is the pwer t cnvey title; the trustee can nly use this pwer when prperly authrized by the beneficiary. Please see Trust Apprval sectin fr RMS recmmended vendrs fr Trust Review & Apprval services fr all three (3) types f trusts. Beneficiaries The Brrwers must be the primary beneficiaries f the trust. They cannt be the residual r alternate beneficiaries. Fr mre infrmatin, cnsult yur lcal cunsel. Special legal pinins may be required fr Illinis r Flrida Land Trusts. Obtain a Cpy f the Trust The trustee is under a fiduciary respnsibility t hld and manage the trust assets fr the beneficiary. The trustee s respnsibilities are set ut in a trust agreement. A cmplete cpy f the Declaratin f Trust r Trust Agreement must be submitted t the underwriter and the title cmpany with all amendments and schedules. Califrnia lans: Califrnia Prbate Cde Sectin prvides a means by which the trustee(s) f a trust can prvide a certificatin f trust in lieu f an actual cpy f a trust agreement t a third party wh is cntemplating entering int a transactin with the trust. Trust Apprval Fr all reverse mrtgage prducts, the eligibility f a prperty held by trust is subject t review and apprval f the trust by a qualified attrney AND the title cmpany. An attrney s pinin letter must be submitted t RMS prir t the lan being apprved fr final clsing dcuments and/r purchase. RMS recmmends the fllwing vendrs fr Trust Review and Apprval: Revised 03/2014 Page 42

43 Fr Revcable Trusts: Gregg & Valby, PC 1700 West Lp Suth, Suite 200 Hustn, Texas Fr Irrevcable Trusts: Paul Lvegrve, Esq. Attrney Trust Review Fr Land Trusts Law Offices f Slmn & Leadley 320 East Indian Trail Aurra, IL Office: lendertrustreview@gmail.cm The prcessr will submit the trust t title cmpany with the title rder. If the trust is acceptable t the title cmpany, the title cmpany will issue a special title endrsement. If the title cmpany (r if necessary, RMS utside legal cunsel) des nt apprve the trust, then the lan is nt eligible fr apprval t clse and/r purchase by RMS. Trust Items Signed at Clsing The Brrwer(s) may r may nt be the trustee(s) f the trust. The Trustee(s) must sign the Ntes, Mrtgage Deeds and all riders at clsing but d nt execute the Lan Agreement. The Trustee(s) must als sign the Ntice f Right t Cancel and the TIL dcument. The Brrwers must sign the Nte, Mrtgage Deeds and all ther lan dcuments. If the Brrwer(s) and the trustees(s) are ne and the same, they must execute the Mrtgage Deeds as bth (Trustee and Brrwer). The Trust Acknwledgment must be executed at clsing fr all lans clsing in a trust r if the Brrwer(s) are transferring the prperty ut f a trust. Trusts with POAs r Cnservatrs If the Brrwer wants t use a Pwer f Attrney in cmbinatin with a trust, the clsing agent must apprve the use f a POA with a trust. Additinal requirements apply fr a POA please refer t Pwer f Attrney heading. On cnservatr trusts, the lan must be acknwledged by the curts. Other requirements fr cnservatrs may apply. See Guardian r Cnservatr heading. Signature by Mark Signing dcuments with a mark r X is a permitted practice in all 50 states. Typically, it is dne because f a physical impairment, nt a mental ne (If there is a mental impairment, and the brrwer is nt cmpetent, then nly a POA culd act fr the brrwer). This tpic is an element f cntract law, and cntract law is a feature f state law, nt federal. Thus, there is n universal Revised 03/2014 Page 43

44 standard that applies t all 50 states. The nly cmmn elements we knw f that are universal are: 1) the brrwer must persnally appear befre the ntary, 2) prperly identify him r herself, and 3) be able t understand and cmmunicate with the ntary t ensure that the signature is a free, cmpetent act. States may impse additinal burdens n ntaries (special ntary clauses, certificates r special frms, etc.), but that s incumbent n yur settlement agent and/r ntary t knw. It s ne f the things they get paid t d, namely ensure that dcuments are prperly executed under their state s law. RMS requires that if a brrwer is signing with a mark, tw witnesses are required. A single, ntarized affidavit with tw witnesses is acceptable t cver the entire applicatin package, but tw witnesses must execute all clsing dcuments. Special Prperty Guidelines Planned Unit Develpment PUD A PUD is a cmmunity that requires the hmewner t pay a mandatry fee fr the maintenance and use f cmmn areas. At clsing, the Brrwer will sign an additinal frm called the PUD rider. Check the title cmmitment t be sure that the develpment is nt recrded as a cndminium instead f a PUD. If it is, see Cndminiums and C-ps heading. The title cmpany shuld cnfirm there are n unpaid dues r assessments. If the rads are private, the assciatin shuld include a certificatin that they wn and maintain the rads. Cndminiums and C-ps Definitins A cndminium, r cnd, is a type f jint real estate where each husing unit is individually wned and all residents cllectively wn the cmmn areas f the building. Owners may have exclusive use f certain limited cmmn areas. Cmmn areas can include grunds, lbbies, elevatrs, hallways, surrunding prperty, and recreatinal facilities. A c-p is a c-peratively wned apartment building. Instead f wning real prperty, the Brrwers wn a lng-term lease and the right t sle and exclusive use f a dwelling fr an indefinite perid. C-Ops C-ps are nt currently acceptable under the FHA HECM prgram. apprved the authrity, HUD has nt yet released guidelines. General Cnd Guidelines Althugh Cngress has Eligible Prjects Cndminium units are eligible fr financing by RMS when the fllwing cnditins are met: The prject appears n FHA s list f prjects with an Apprved HUD Review and Apprved Prcess status. FHA Apprved Cndminiums list can be fund at: Revised 03/2014 Page 44

45 Nte: Units in prjects nt n FHA s apprved prject list are nt eligible. The prject must be cmprised f at least 2 units. The prject must cntinue t cmply with the fllwing FHA requirements: Investr Ownership: N mre than 10 percent f the units may be wned by ne investr. This limitatin als applies t develpers/builders that subsequently rent vacant and unsld units. Fr cndminium prjects with ten r fewer units, n single entity may wn mre than ne unit within the prject; all units, cmmn elements, and facilities within the prject must be 100 percent cmplete. Delinquent Hme Owners Assciatin Dues: N mre than 15 percent f the ttal units can be in arrears (mre than 60 days past due) f their cndminium assciatin fee payments. Owner-Occupancy Rate: At least 50 percent f the units in a prject must be wner-ccupied r sld t wners wh intend t ccupy the units. FHA Cncentratin Rate: Prjects may have n mre than 50 percent f the ttal units encumbered with FHA insurance. The prject must be cvered by hazard, fld, liability and fidelity cverage, as applicable, meeting the requirements fr cndminium insurance. FHA will display the cncentratin infrmatin fr each apprved cndminium develpment n the apprved cndminium listing, which can be fund n bth FHA Cnnectin and n the public website at The cncentratin level will be based n case numbers assigned n units in a prject; FHA will nt issue new case numbers nce the maximum cncentratin level (plus a small tlerance t accmmdate sme fall-ut) has been reached in any particular develpment. The fllwing dcumentatin is required fr verificatin f prject eligibility: Screen print f Cnd Prject Maintenance Results frm FHA Cnnectin shwing apprval Revised 03/2014 Page 45

46 Hmewner s Assciatin Questinnaire must cmpleted by the hmewner s assciatin r management agent. The Brrwer may nt be charged a fee fr btaining infrmatin frm the assciatin r agent. Cndminium appraisal reprt (Frm 1073), with all infrmatin prvided including remaining ecnmic life. Fr site cndminiums, the appraisal may be reprted n Frm Hmewners Assciatin must prvide a cpy f the blanket insurance plicy declaratins page t shw that they have the crrect cverage. The declaratins page must be fr the master plicy that cvers all f the buildings in the cnd assciatin. Cnd cverage must include full replacement cverage fr the buildings and liability f $1,000,000 The cnd cverage is usually handled by the hmewners assciatin. A certificate f insurance is issued in the Brrwer s name with the unit number shwn n the certificate, and the mrtgagee clause. HO-6 (Walls-in) cverage is required if the master plicy des nt cver unit interir imprvements r betterment When required, HO-6 cverage must be 20% f appraised value. Cpy f fld cverage, if applicable Please nte: HUD requires the Lender t recertify that the prject cmplies with HUD Guidelines each and every time a lan is made even if the prject is n the apprved list. Detached (Site) Cndminiums Fr single family detached dwellings that are part f a cndminium prject (site cnds), prject apprval is nt required. Hwever, the prperty must be classified as a cndminium and a cndminium rider t the security instrument is required. The appraisal shuld be reprted n Fannie Mae Frm Revised 03/2014 Page 46

47 Delinquent HOA Dues/Superir Lien When the subject prperty is a cndminium r PUD unit lcated in a jurisdictin in which delinquent hmewner s dues and assessments may becme a lien that is superir t the first mrtgage, cnfirmatin that the dues and assessments are current at the time f lan funding r purchase will be required. In cases where there are delinquent dues r assessments, the past due amunt must be paid prir t clsing and the Brrwer must prvide a written explanatin fr the delinquency and cnfirmatin that the dues will be paid in a timely manner in the future. Fr clsed lan purchase transactins, RMS will cnsider such lans n a case-by-case basis. In rder t be eligible fr a reverse mrtgage, the cnd must meet these requirements: Remember t check the Title Cmmitment fr Recreatinal Leases. These are n lnger acceptable fr FHA lans. If a termite inspectin is required, and the Brrwer is part f a Hmewner s Assciatin with an existing termite cntract, that cmpany shuld prvide the reprt. See Termite Guidelines heading. Cndminium Appraisals Appraisals fr cnds must be n the 1073 appraisal frmat. Check t be sure appraiser has supplied remaining ecnmic life. Additinal required infrmatin includes: The prject s amenities (land, parking, pl, etc.) The cnd building (number f flrs, units, elevatrs, etc.) Occupancy Budget and fees Sales cmparisns shuld als be cnds Right f First Refusal Permitted fr Cnds in HECM Prgram A right f first refusal is usually present in senir living cmmunities, such as thse that prhibit ccupants wh are yunger than a certain age. These assciatins have the right t buy the hme (r refuse t buy it) befre it is ffered fr sale t smene else. These cnd assciatins usually are nt accepted n an FHA lan. Fr the HECM lan nly, HUD has remved this restrictin, and hmes in a right f first refusal assciatin are eligible fr the HECM lan. Recreatinal Leases fr Cnds A Recreatinal Lease is a lease f the cmmn areas (club huse, pl, tennis curts, etc.) held by an utside party. RMS will nt accept recreatinal leases f any kind as HUD will nt insure a lan with a recreatinal lease prvisin. Accessry Dwelling Units (ADUs) The accessry unit is defined as a habitable living unit added t, created within, r detached frm a single-family dwelling that prvides the basic requirements fr living, sleeping, eating, cking, and sanitatin. Accessry Dwelling Units (ADUs) are cmmnly understd t be a separate additinal living unit, including separate kitchen, sleeping, and bathrm facilities, attached r detached frm the primary residential unit, n a single-family lt. ADUs are subrdinate in size, lcatin, and appearance t the primary unit and may r may nt have separate means f ingress r Revised 03/2014 Page 47

48 egress. Attached units, cntained within a single-family hme, knwn variusly as "mther-in-law apartments," are the mst cmmn type f accessry dwelling unit. Accessry units usually invlve the renvatin f a garage, basement, r small additin t a single-family hme. The determinatin f whether r nt an ADU is a secnd dwelling unit is t be made by the appraiser and indicated in the site analysis sectin f the reprt where zning, highest and best use, and legal use are addressed. The fact that an ADU is rented r generates incme shuld nt categrically result in a determinatin that the prperty cntains tw dwelling units. FHA Criteria Accessry dwelling unit" means a subrdinate dwelling unit may r may nt be incrprated within, r detached frm a single-family structure. Accessry units may nt be subdivided r therwise segregated in wnership frm the primary residence structure. Sme accessry units may predate the adptin f lcal zning rdinance and may therefre be classified as legal nncnfrming units. Utility Service Requirements An accessry apartment must be cnnected t the utilities (except telephne, televisin and cable) f the dwelling unit and may r may nt have separate services. Please nte: A 2-4 unit dwelling, with an accessry unit is ineligible fr FHA financing. Mdular Hmes If the hme is a mdular hme, nt a manufactured hme, these manufactured hme guidelines d nt apply. A mdular hme is different frm a manufactured hme. In a mdular hme, the trailer is nt a structural part f the hme; weight is supprted by exterir fundatin walls and there is an fficial state label indicating acceptance under the state prgram. Mdular cnstructin is als a factry-built hme, but is treated the same as a stick- built hme fr underwriting purpses. The underwriter will require dcumentatin that the prperty is a mdular hme. If prved t be a mdular hme, there are n ther requirements. Manufactured Hmes Changes t manufactured husing requirements fr new and existing cnstructin were made by the Husing and Ecnmic Recvery Act f 2008 (Public Law , apprved July 30, 2008) (HERA). Manufactured husing is eligible fr HECM financing and fr Federal Husing Administratin (FHA) mrtgage insurance under Title II f the Natinal Husing Act. At this time RMS, Inc. will NOT ffer lans fr the purchase f new manufactured hmes under the HECM prgram. Mre infrmatin n FHA Insurance fr Manufactured Husing under the Title II prgram can be fund in HUD Handbks Chapter 8; HUD Handbk , Rev-2, Sectin 3-4 and Appendix 11; and Permanent Fundatins Guide fr Manufactured Husing, (HUD-7584), Mrtgagee Letter , and mst recently by HUD s new ManuFACTured Husing Newsletter lcated at Revised 03/2014 Page 48

49 Manufactured husing is eligible fr HECM financing with RMS cnsidering all f the fllwing items are satisfied prir t lan clsing: Manufactured hmes must: Nt be a single-wide mbile hme Be built and remain n a permanent chassis Have axles and tngue remved Have permanent utilities installed Have any/all additins cmpliant with cunty and HUD requirements Built after 6/15/1976: A manufactured hme must be built after June 15, 1976, and bear an affixed "HUD tag" n each sectin t be eligible fr purchase by RMS. The appraiser shuld verify the lcatin and wrding n the tag(s). N exceptins are allwed. Square ftage: A manufactured hme must have a flr area f nt less than 400 square feet. Please Nte: At least 2 cmps must be prvided with similar square ftage. Fundatin: The unit must be designed t be used as a dwelling with a permanent fundatin built t FHA criteria. The fundatin must be inspected by a licensed engineer r registered architect t cnfirm that it meets the guidelines in the Sept PERMANENT FOUNDATION GUIDE FOR MANUFACTURED HOUSING, HUD and HUD Handbk Rev 2. If a permanent fundatin is t be cnstructed under an existing eligible unit, the unit may be jacked-up r under pinned in rder t install a new fundatin. The Engineer s Certificatin n Fundatin Cmpliance with the PFGMH must be: a) cmpleted by a licensed prfessinal engineer r registered architect, wh is licensed/registered in the state where the manufactured hme is lcated; and b) site specific and cntain the engineer s r registered architect s signature, seal, and/r state license/certificatin number. In states where seals are issued, the seal must be n the certificatin. c) n mre than six (6) mnths ld at the time f effective date f the appraisal Revised 03/2014 Page 49

50 An Engineer s Certificatin n Fundatin Cmpliance is nt required in the lan file r insuring binder fr a HECM t HECM Refinance, prvided that n mdificatins have been made t the fundatin r structure frm the date f the effective certificatin. Perimeter Enclsures: The space beneath manufactured hmes must be prperly enclsed. The perimeter enclsure shall be a cntinuus wall (whether bearing r nn-lad bearing) that separates the crawl space frm backfill, and keeps ut vermin and water. The enclsure must be adequately secured t the perimeter f the unit and allw fr prper ventilatin f the crawl space. Accrdingly, fr: a) New Cnstructin: a. The space beneath the hme shall be enclsed by a cntinuus fundatin-type cnstructin designed t resist all frces t which it is subject withut transmitting frces t the building superstructure. b. The enclsure shall be adequately secured t the perimeter f the hme and be cnstructed f materials that cnfrm, accrdingly, t HUD Minimum Prperty Standards (MPS) (such as: cncrete, masnry, r treated wd) and the PFGMH fr fundatins. b) Existing Cnstructin: i. If the perimeter enclsure is nn-lad bearing skirting cmprised f lightweight material, there must be adequate backing (such as: cncrete, masnry, r treated wd) t permanently attach and supprt r reinfrce the skirting. Single installatin: The manufactured unit must nt have been installed r ccupied previusly at any ther site r lcatin. Manufactured units may be mved nly frm the manufacturer s r dealer s lt t the site n which the unit will be insured, and must have been permanently installed. The underwriter will lk fr any signs frm either the appraisal reprt r ther dcumentatin that indicates it has been mved mre than nce. Appraisal fr Manufactured Hmes: Appraisals fr manufactured hmes must be n the 1004c frmat fr manufactured hmes. Majr differences frm ther appraisals include: At least 2 cmps must be manufactured (even if utside neighbrhd) Spaces t fill in required HUD data as discussed abve Spaces t discuss additinal mdificatins and imprvements Manufactured Hmes in Cnd Prjects: Under authrity granted by enactment f HERA, individual manufactured husing units in cndminium prjects are nw eligible fr FHA insurance. Until updated guidance n the prcessing f cndminium prject apprvals is published, manufactured husing cndminium prject apprval is subject t the requirements f HUD Handbk , Chapter 11. The Spt Lan Apprval prcess as defined in Mrtgagee Letter is nt applicable. All manufactured husing prject apprval requests must be prcessed by the Hmewnership Center that has gegraphical authrity ver the prperty t be insured. RMS may impse a pricing adjustment cntact Capital Markets fr details. HUD Seal: All manufactured hmes must have an affixed HUD label (tag) r data plate lcated n the utside f the hme. If the hme is a multi-wide unit, each unit must have a Revised 03/2014 Page 50

51 label. In sme instances, the units may nt be sequentially numbered. Appraisers are t list the manufactured unit s label number(s) n the appraisal reprt in ne f the cmment sectins, preferably n the frnt page under "Additinal Features". All transprtable sectins f manufactured hmes built in the U.S. after June 15, 1976 are labeled. The label is the manufacturer's certificatin that the hme sectin is built in accrdance with the U.S. Department f Husing and Urban Develpment's Cnstructin and Safety Standards in effect n the date the hme was manufactured. HUD Standards include Bdy and Frame Requirements, Thermal Prtectin, Plumbing, Electrical, Fire Safety, and ther aspects f the hme. Each Certificatin Label has a unique label number and is tw inches (2") by fur inches (4") in size. The label number cnsists f three letters fllwed by a number f six r mre digits. The three letters designate the Prductin Inspectin Primary Inspectin Agencies (IPIA) that issued the Certificatin Label t the manufacturer. The Certificatin Label is permanently affixed t the exterir f each transprtable sectin. The label is lcated ne ft (1') up and away frm the left rear crner (facing frward; the tw bar end indicates the frnt f the sectin). The Certificatin Label number can becme necessary when placing the hme in a manufactured hme cmmunity, r may be demanded by insurance underwriters r by lenders when the hme is purchased r refinanced. Hwever, ver the life f the hme, the Certificatin Label is smetimes inadvertently remved. This culd have ccurred when the hme was sited, installed n a fundatin, re-sided, r fr ther legitimate reasns. HUD des nt reissue lst r missing labels nce the hme has been sld. In these cases, Certificatin Revised 03/2014 Page 51

52 Label Verificatin can be prvided. This verificatin is issued by IBTS, HUD's cntractr, and is acceptable in lieu f a replacement label. Labeling infrmatin fr all hmes built under the Federal Prgram since June 15, 1976 is maintained by IBTS. Please Nte: If the tag is missing, the appraiser shuld find the HUD data plate in the interir f the hme. It will usually be in ne f three places: n r near the main electrical panel, in a kitchen cabinet, r in a bedrm clset. Classified as Real Prperty: The manufactured hme must be classified as real prperty (i.e. the DMV title must be relinquished), and generally taxed as such. Cntact title if yu are nt sure if the manufactured hme is classified as real r persnal prperty fr the state in which it is lcated. If the manufactured hme is nt taxed as real prperty; cnditin fr clarificatin f which ptin will be prvided (recrding a title eliminatin OR endrsement). The underwriter shuld enter the apprpriate PTC cnditin in Cmpass. If the title reflects the title eliminatin has already been recrded n the manufactured hme, n additinal PTF cnditins will be required. Fld Zne: Manufactured Hmes lcated in a fld zne r partially within a fld zne are ineligible. Insurance Hazard Insurance Each submissin package must include a prf f insurance. Refer t either the Applicatin Infrmatin Frm in the submissin package r the prf f insurance cllected frm the Brrwer(s) fr agent cntact infrmatin and plicy number. If the lan is clsing in the name f RMS, all declaratin pages must cntain the fllwing mrtgagee clause prir t clsing: Reverse Mrtgage Slutins, Inc. ISAOA/ATIMA P.O. Bx San Antni, TX All declaratins pages must include evidence f payment status. Prperty insurance fr a hme mrtgage must shw the prperty is prtected against lss r damage frm fire and ther perils cvered by the standard extended cverage endrsement. The definitin f a standard extended cverage endrsement is: Extensin f cverage available under the standard fire plicy: The standard plicy nly cvers the perils f fire and lightning. The endrsement cvers rit, rit attending a strike, civil cmmtin, smke, aircraft and vehicle damage, windstrm, hail, and explsin. Prperty insurance must include prtectin against lss r damage frm fire r ther hazards cvered by the standard extended cverage endrsements fr the life f the lan. The cverage shuld prvide replacement cst r else prvisins fr inflatin adjustments. Hazard binders r plicies that limit r exclude cverage in whle r in part frm windstrm, hail Revised 03/2014 Page 52

53 damages, r ther perils nrmally in an extended cverage endrsement are nt acceptable. In Puert Ric, Earthquake Cverage is required. It is generally a part f the standard Hazard plicy and cannt be excluded frm the plicy. General Cverage Requirements: The plicy must be effective at time f clsing and be paid thrugh 60 days past the funding date, unless restricted by state law. The fllwing items must be clearly and cnsistently indicated: Brrwer s name, effective date, cverage amunt, crrect address, and mrtgagee clause. The hazard insurance must be greater than r equal t ne f the fllwing replacement amunts: Guaranteed replacement cst n the dwelling Estimated Cst New Appraised Value minus the Site Value If a plicy includes prvisins fr inflatin adjustments, we will accept this prviding: The percentage is listed n the declaratins page, and The increase is enugh t bring the cverage t the required amunt If the Brrwers are paying fr the increase in hazard insurance at the clsing, we will typically cllect a full year s hazard insurance payment UNLESS the hazard insurance cmpany states in writing that a smaller payment is acceptable. Deductible: Unless a higher maximum deductible amunt is required by state law, the maximum allwable deductible is 5% f the face amunt f the insurance plicy. Additinal Requirements fr Cnd & PUD master plicies: The plicy must cver all f the general and limited cmmn elements that are nrmally included in cverage including fixtures, building service equipment, and cmmn persnal prperty and supplies belnging t the hmewner's assciatin. Cmmercial and general liability cverage fr cndminiums must be at least $1 millin fr bdily injury and prperty damage per single ccurrence. Please als see Cndminiums and C-ps sectin. Fld Insurance The fld certificatin determines whether fld insurance is needed, and if s, whether fld insurance is available. Nte: If the cmmunity related t the prperty des nt participate in the Natinal Fld Insurance Prgram (NFIP) the prperty may nt be eligible. See Fld Zne Mapping Revised 03/2014 Page 53