requirements found in Regulation Z, 12 CFR Part 226. FHA strongly encourages lenders to seek an outside counsel’s opinion to assure compliance with all applicable Federal or State laws.
Lenders are required to ensure the property, when used as collateral for the HECM, meets the following property requirements:
Will serve as the principal residence of the HECM mortgagor.
In the case of newly built home, construction is complete and a certificate of occupancy or its equivalent has been issued.
Any construction loan financing for the property, which will serve as the collateral for the HECM loan, is satisfied and the HECM liens will be in first and second lien positions and, at the time of closing, no other liens against the property exist.
Lenders originating HECM for purchase transactions are responsible for determining whether a particular HECM loan is open or closed-end credit. In accordance with 24 CFR 206.43, lenders must comply with the regulatory disclosure requirements.
Several changes have been made to FHA Connection to accommodate HECM for Purchase mortgages. To ensure a HECM purchase transaction is successfully entered into FHA Connection, lenders must follow the instructions below.
Case Number Assignment Screen
Type of CaseSelect “HECM Purchase” from the drop-
Appraisal Logging Screen
Contract Price Enter numeric value from sales contract
Date of ContractEnter date of sale from sales contract
Was prior sale/transfer of
this property within the past 3 years? Select correct choice from drop-down list
Date of Prior Sale/Transfer If within 3 years, enter date of prior sale
Price of Prior Sale/Transfer If within 3 years, enter price of prior sale
HECM Insurance Application Screen
Borrower InvestmentEnter numeric value