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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.

CLOSING GUIDANCE

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.

DATA ENTRY 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

System FieldLender Entry

Type of CaseSelect “HECM Purchase” from the drop-

down list

Appraisal Logging Screen

System FieldLender Entry

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

System FieldLender Entry

Borrower InvestmentEnter numeric value

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