NRMLA submitted two sets of comments to the Department of Housing and Urban Development this week, one letter confirming that certain HUD forms once used by servicers are now obsolete and a second letter requesting clarification on certain sections of Mortgagee Letter 2021-08 related to the LIBOR transition.
In the first letter, NRMLA comments that Forms HUD-27011, HUD-5002 and HUD 50012 are no longer necessary – the same information is now collected through HUD’s online HERMIT system – and that HUD should feel free to retire the forms. However, deficiencies exist in the HERMIT system that need to be corrected for servicers to do their jobs efficiently and in compliance with HUD regulations.
NRMLA asked HUD to resume meetings of the HERMIT working group, involving key HUD and reverse mortgage industry representatives, to “facilitate resolution of unresolved system deficiencies.”
In the LIBOR transition letter, NRMLA says while it understands that it is anticipated that initially only a 30-day average SOFR will be available, Mortgagee Letter 21-08 specifies that lenders may only offer the SOFR index for Annually Adjustable HECMs. “We respectfully request that FHA also allow mortgagees to offer a Monthly Adjustable HECM based upon the 30-day average SOFR index using the same commingled CMT index for the Expected Rate,” says NRMLA.
Another issue raised by NRMLA is that mortgagees previously had the option of rounding the note rate of interest for adjustable-rate HECMs to the nearest one-eighth of one percentage point (0.125 percent). While ML 21-08 doesn’t address this issue, the new Model HECM ARM Note states, “[t]he Lender will then round the result of the Margin plus the Current Index to the nearest one-eighth of one percentage point (0.125%).”
Making this a requirement in the HECM Note, but not in ML 21-08, raises additional issues and need for clarification not addressed by ML 21-08, according to NRMLA. “We respectfully request that FHA revert to its prior policy and allow, but not require, mortgagees to round the note rate of interest on adjustable rate HECMs.”
To read the letters in their entirety, please visit the Comment Letters section of NRMLAonline.org.
NRMLA Submits Servicing and LIBOR Transition Comments to HUD
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