On November 19, 2010, the Department of Housing and Urban Development (HUD) released Mortgagee Letter 2010-39, which makes changes to the HECM HUD-1 Settlement Statement Closing Certification.
According to the Mortgagee Letter:
“On the day of loan closing, the HECM mortgagor must certify the source of cash, or its equivalent, used for the monetary investment or closing costs was not provided by the seller, or any other person or entity that financially benefits from the transaction. Likewise, the seller must certify the HECM mortgagor will not be paid or reimbursed for any part of the monetary investment or closing costs before, during, or after loan closing.”
The new certification language replaces language found in paragraph 6-9(g) of HUD Handbook 4235.1, REV-1. The language has been changed to impose penalties for false certifications or fraudulent activities and includes new certification language for sellers of a HECM for Purchase transaction.
The new language must be used for all HECM case numbers assigned on or after December 1, 2010.
The Mortgagee Letter also includes an attachment with the addendum to the HUD-1 Settlement Statement.
Forward FHA purchase loans allow for seller credits and concessions, but HECM’s for purchase do not. With seller concessions being the norm in today’s market, why not allow them with HECM’s? HUD is clear in their language they won’t allow them. Below is the language for the seller certification:
“I certify that I have no knowledge of any loans that have been or will be made to the borrower(s), or loans that have been or will be assumed by the borrower(s), for purposes of financing this transaction, other than those described in the sales contract dated _____________(including addenda). I certify that I have not and will not pay or reimburse the borrower(s) for any part of the monetary investment. I certify that I have not provided and will not pay or reimburse the borrower(s) for any part of the borrower’s closing costs which have not been previously disclosed in the sales contract (including any addenda). I certify that I have not provided and will not provide cash or its equivalent, in whole or in part, to the borrower (s) before, during or after loan closing. I (we) certify that the above statements are true and accurate.”
Can anyone shed some light as to why they feel HUD will not allow seller concessions on a HECM for purchase? Please comment below.