4-7: REQUIRED MORTGAGE CREDIT DOCUMENTATION (11/18/1994)

© HUD Single Family Housing Policy Handbook 4235.1

After performing a preliminary eligibility review of the borrower, the lender must submit the following documents to the local HUD office for Mortgage Credit Analysis:

A. Uniform Residential Loan Application (URLA) and HUD/VA Addendum (Form HUD-92900-A). This application must be completed according to the instructions contained in Appendix 15. At the time that the lender completes the borrower's application, it must do the following:

1) Participate in a face-to-face interview with the borrower in which the information on the application is verified by the borrower. Exceptions to this requirement are as follows:
a. A face-to-face interview is not required if the property is at least 50 or more miles from the mortgagee's nearest office, and a face-to-face counseling session was conducted. Under these circumstances, the mortgagee may interview the borrower by telephone, and must certify as to the date and person(s) with whom they spoke. The mortgagee must elicit as complete a picture of the borrower as if a face-to-face interview were conducted.
b. If the borrower lacks legal competency and the loan application is being executed by a person holding a durable power of attorney, or by a court-appointed conservator, the face-to-face interview must be conducted with the person holding the power of attorney or conservator. If the borrower is legally competent and the loan application is being executed by an agent or attorney-in-fact, then the face-to-face interview may be conducted with the agent, but every effort should be made on the part of the mortgagee to interview the borrower as well. (Geographical limit of 50 miles also applies here.)
c. If married spouses, or other co-borrowers, are living apart because one of them is temporarily or permanently in a health care facility, a face-to-face interview is only required with the borrower who is still living in the home.

2) Provide to the borrower blank copies of the first mortgage, first note and Loan Agreement, if it has not already done so, and explain the principal provisions of those documents, including a disclosure of servicing fees, if any are to be charged.

3) Provide to the borrower a copy of Notice to the Borrower (Appendix 14), which explains the procedures that the borrower should follow in case of chronically late payments or nonpayment by the lender. This disclosure must also explain that the borrower's liability is limited to the value of the property at the time the mortgage is due and payable.

4) Explain to the borrower the consequences of placing junior liens on the property.

5) The lender must provide the borrower with a certification for the borrower's signature stating that he or she received copies of the security instruments and the Notice to the Borrower, and that the lender explained the principal provisions of the documents. This document must accompany the application in the mortgage credit package.

B. Credit report for each borrower. A merged in-file report, containing the information currently available from three consumer credit information repositories will fulfill this requirement.

1) The lender's review of the report should be limited to the Public Record Information section, in order to determine whether or not the borrower is delinquent or in default on any Federal debts.

2) Any borrower that is presently delinquent or in default on any Federal debt owed to the United States is ineligible for a HECM until the debt is brought current, paid or otherwise satisfied, or satisfactory repayment arrangements have been made between the borrower and the Federal agency to which the debt is owed and is verified in writing. Additionally, any borrower with a judgment lien against his or her property for a debt owed to the United States is not eligible for a HECM until the judgment is paid or otherwise satisfied.

C. Credit Alert Interactive Voice Response System (CAIVRS). In order to demonstrate evidence of prescreening, a separate written statement signed by the lender must be prepared containing the authorization code from CAIVRS (see Paragraph 4-3).

D. Title evidence. A title insurance commitment at least equal to the maximum claim amount, showing that the mortgage will be a first lien of record when it is recorded, must be submitted. Other title evidence is acceptable only if the local HUD office determines that title insurance is not available at reasonable rates.

E. Certificate of counseling. The counseling agency will provide a certificate (Appendix 16) attesting to the borrower's attendance at a counseling session. The counseling session may be attended by a person holding a power of attorney or by a conservator. See Paragraph 4-6C.

F. Identification of the borrower. Each borrower must provide picture identification, evidence of his or her age, and evidence of his or her social security number. A photocopy of the picture identification, and of the documents evidencing social security number and age must be included in the application package.

1) Picture identification may be a photocopy of the driver's license, passport, job or trade union identification card, or similar official documentation. If photographic identification is not available, the lender must provide a satisfactory explanation as to why the borrower cannot provide it and what documents the lender examined to establish the identity of the borrower.

2) Social security number documentation must be provided for all borrowers on all transactions. While the actual social security card is not required, the social security number can be obtained from another source such as the driver's license, pay stub or bank statement. The only exception to the social security number requirement is for individuals not required to obtain a social security number, such as employees of the World Bank or foreign employees of embassies. If a borrower contends he or she is not required to obtain a social security number, he or she must execute a certification that a social security number has not been issued.

G. Good Faith Estimate of Settlement Costs. The lender must provide an estimate of settlement costs to the borrower no more than three (3) days after the loan application is provided to the borrower, and a copy of the estimate signed by the borrower should be submitted.

H. Verification of Deposit. Must be submitted for any portion of the loan origination fee that will be paid in cash.

I. Truth in Lending Act Disclosure Statement. The lender should comply with requirements in Regulation Z for Open-End Credit.

J. ARM Disclosure Statement. For adjustable-rate mortgages, the lender must provide the borrower with a disclosure statement in compliance with Regulation Z (12 CFR 226). This statement must be provided to the borrower with the loan application and signed by all borrowers.

K. Shared Appreciation Disclosure Statement. If this is applicable, besides disclosing the terms of the shared appreciation mortgage, the lender must disclose to the borrower the principal limit, interest rate and monthly payments for a comparable mortgage offered by the lender without shared appreciation. The calculations for a shared appreciation mortgage are explained in Chapter 5.

L. Loan Cost Disclosure Statement. Lenders are required by Section 255 of the National Housing Act to disclose total loan costs for a HECM expressed as an average annual percentage rate for at least two loan terms and two house appreciation rates. Total loan costs include closing cost, interest, mortgage insurance premiums, and servicing fees. In order to satisfy this requirement, lenders must use the HECM spreadsheet software (see Paragraph 5-2) which has been designed to provide this information.