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HECM Financial Assessment
Steps for Processing

HECM Financial Assessment information for HECM Insurance Application is entered as follows:

  1. On the HECM Financial Assessment page, enter the case number assigned to the mortgage in the FHA Case Number field.

  2. Click Send. The HECM Financial Assessment Update page appears.

  3. On the HECM Financial Assessment Update page, enter the information for each section of the page: Credit Characteristics, Accessory Dwelling Unit, Monthly Effective Income, Monthly Expenses, Monthly Property Charges, Projected Life Expectancy Property Charges, Monthly Residual Income, Compensating Factors, and Life Expectancy Set Aside Requirement.

  4. Click Send. If processing was successful, the HECM Financial Assessment Results page appears with a Success message near the top of the page. Note: You can click Other Functions to use other functions, such as HECM Insurance Application, for the same case number.

    -or-

    If there was an error, the HECM Financial Assessment Update page appears with an error message near the top of the page and an Error(s) Detected field in the Details section near the bottom of the page. Make the correction and process again.

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Credit Characteristics

In the Credit Characteristics section of the HECM Financial Assessment Update page, select Yes, No, or N/A from the drop-down list in each field. Get the information from the HECM Financial Analysis Worksheet, Sections A and B and Fannie Mae form 1009, Section VI.

Notes: The Real Estate Debt - No Lates in Last 12 Months < 3 30 Day Lates in Last 24 Months and Other Installment Debt - No Lates in Last 12 Months < 3 30 Day Lates in Last 24 Months fields specify whether there were no late payments in the last 12 months and less than three 30-day late payments in the last 24 months. The Revolving Debt - No 90 Day Lates < 3 60 Day Lates in Last 12 Months field specifies whether there were no 90-day late payments and less than three 60-day late payments in the last 12 months.

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Accessory Dwelling Unit

If the property has an accessory dwelling unit (ADU), do the following in the Accessory Dwelling Unit section of the HECM Financial Assessment Update page:

    • Select Yes from the drop- down list in the Accessory Dwelling Unit field. Get the information from Fannie Mae Form 1004 and Fannie Mae Form 1007.
    • Enter the total amount of monthly income the borrower receives from the rental of the ADU in the Amount of Total Income Derived from ADU field. This amount cannot exceed Total Income. Get the information from HECM Financial Analysis Worksheet, Section F, Fannie Mae Form 1004, Fannie Mae Form 1007, and Form 1040, Schedule E.
    • If the borrower has limited or no history of rental income from the ADU since the previous tax filing, select Yes from the drop-down list in the Limited or No History of ADU Income. Otherwise, select No. If Yes is selected, the Amount of Total Income Derived from ADU cannot exceed 30 percent of the Total Income amount.

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If the property does not have an ADU, be sure No is selected in the Accessory Dwelling Unit and Limited or No History of ADU Income fields and the Amount of Total Income Derived from ADU field is blank or zero.

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Monthly Effective Income

In the Monthly Effective Income section of the HECM Financial Assessment Update page, enter an amount in dollars and cents in each field in this section. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75). Enter 0 for a zero amount (the number is automatically reformatted to 0.00). Where applicable, specify whether the amount is a positive or negative dollar amount by selecting + or -, respectively. The amount entered in the Total Monthly Income field must equal the sum of the amounts in the Imputed Monthly Income from Dissipation of Assets and Monthly Income from All Other Sources fields. Get the information from the HECM Financial Analysis Worksheet, Sections D and F and Fannie Mae form 1009, Sections III and IV.

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Monthly Expenses

In the Monthly Expenses section of the HECM Financial Assessment Update page, enter an amount in dollars and cents in each field in this section. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75). Enter 0 for a zero amount. The amount entered in the Total Monthly Expense Payments field must equal the sum of the amounts in the Real Estate Debt Monthly Payments, Non-Real Estate Debt Monthly Payments, and Other Monthly Expense Payments fields. Get the information from the HECM Financial Analysis Worksheet, Section H.

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Monthly Property Charges

In the Monthly Property Charges section of the HECM Financial Assessment Update page, enter an amount in dollars and cents in the fields in this section. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75). Please note the following:

Get the information from the HECM Financial Analysis Worksheet, Section H.

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Projected Life Expectancy Property Charges

In the Projected Life Expectancy Property Charges section of the HECM Financial Assessment Update page, do the following:

  1. In the Monthly Property Charges Subtotal x 1.2 field, enter the result of multiplying the Monthly Property Charges Subtotal amount (in the Monthly Property Charges section) by 1.2. Enter an amount in dollars and cents. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75). Enter 0 for a zero amount.

    Note: The calculated amount should not be rounded up. For example, if the calculated amount is 681.468, the amount entered should be 681.46.

  2. Enter the TALC life expectancy of the youngest borrower multiplied by 12 in the TALC Life Expectancy (in Months) field. For example, the TALC life expectancy is 18 years for a borrower 65 years of age. The 18 years are multiplied by 12 months resulting in a total of 216 months. The maximum value that can be entered in this field is 252 months. Get the information from the HECM Financial Assessment Worksheet, Appendix 2.

  3. Enter the expected average mortgage interest rate in the Expected Rate field. For a fixed rate mortgage, the rate must be the same as the interest rate. Do not enter a percent sign (%) and use this format: nn.nnn (e.g., 10.125). Get the information from Form HUD-92900-A, line 8, Home Equity Conversion Loan Agreement, Exhibit 1 - Payment Plan, or Note.

  4. Enter the Expected Rate plus the annual mortgage insurance premium rate of 1.25% in the Compounding Rate (Expected Rate + Annual MIP Rate) field. Do not enter a percent sign (%) and use this format: nn.nnn (e.g., 10.125).

  5. Enter the amount from the results of the calculation of the Projected Life Expectancy Property Charge Cost formula in the Projected Life Expectancy Property Charge field (999999 maximum). Get the information from the HECM Financial Assessment and Property Charge Guide, Sections 5.2 and 5.3.

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Monthly Residual Income

In the Monthly Residual Income section of the HECM Financial Assessment Update page, do the following:

  1. From the drop-down list in the Family Size field, select the number of members of the household whose residual income is NOT equal to or greater than the income required for a one-person family size for the geographic area in which the property is located. Get the information from Fannie Mae form 1009, Section III.

  2. Enter the residual income amount applicable to the borrower’s family size and the geographic region in which property is located in the Residual Income Standard field. Do not enter a dollar sign or cents and use this format: nnnn (e.g., 1160). The amount entered must be consistent with the geographical region and Family Size specified in the HECM Financial Assessment and Property Charge Guide, Section 3.100.

  3. The amounts in the Total Monthly Income, Total Monthly Expense Payments, and Total Monthly Property Charges fields are pre-filled with amounts from the matching fields in the prior Monthly Effective Income, Monthly Expenses, and Monthly Property Charges sections. If an amount needs to be changed for any of these fields, the new amount must be entered in the matching field in the prior section.

  4. Enter the sum of Total Monthly Income minus Total Monthly Expenses and Total Monthly Property Charges in the Residual Income field. Enter an amount in dollars and cents. Do not enter a dollar sign and use this format nnnnnnn.nn (e.g., 1501.75). Then, specify whether the amount is a positive or negative dollar amount by selecting + or -, respectively.

  5. The amounts in the view-only Residual Income Standard and Residual Income fields are pre-filled with the amounts from the prior matching fields in this section, Monthly Residual Income. If an amount needs to be changed for either of these fields, the new amount must be entered in the prior matching field in this section.

  6. Enter the sum of Residual Income Standard minus Residual Income in the Monthly Residual Income Shortfall field. Enter an amount in dollars and cents. Do not enter a dollar sign and use this format nnnnnnn.nn (e.g., 1501.75). Enter 0 for a negative or zero amount.

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Compensating Factors

  1. In the Compensating Factors section of the HECM Financial Assessment Update page, click the check box next to any applicable compensating factor. A check mark appears when a selection is made. To remove the selection (check mark), click the check box again. Get the information from the HECM Financial Analysis Worksheet, Section L.

    Note: If the Non-Borrowing Spouse Income compensating factor is selected, the Family Size must be at least 2.

  2. For mortgages assigned an FHA case number on or after October 3, 2016, an amount must be entered in the box provided for any of the following Compensating Factors selected: Non-Borrowing Spouse Income, Overtime, Seasonal, Part-time or Bonus Income, Expected SSI or Pension Income, and Imputed Income from HECM. Enter an amount in dollars and cents in each field selected. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75). The Residual Income must be at least 80% of the Residual Income Standard in order to include any of these compensating factors.

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Life Expectancy Set Aside Requirement

In the Life Expectancy Set Aside Requirement section of the HECM Financial Assessment Update page, do the following:

  1. Make a selection from the drop-down list in the Requirement field to specify whether the life expectancy set aside is Not Required, Voluntary - Fully Funded, Required - Fully Funded, or Required - Partially Funded.

  2. If the life expectancy set aside is Voluntary - Fully Funded, Required - Fully Funded, or Required - Partially Funded, enter the amount in the Amount field.

    • For Required - Fully Funded and Voluntary - Fully Funded, the amount must be equal to the Projected Life Expectancy Property Charge amount entered in the Projected Life Expectancy Property Charges section.
    • For Required - Partially Funded, the amount must not be greater than 75% of the Projected Life Expectancy Property Charge amount entered in the Projected Life Expectancy Property Charges section.

    Enter an amount in dollars and cents. Do not enter a dollar sign and use this format: nnnnnnn.nn (e.g., 1501.75).

    -or-

    If the life expectancy set aside is Not Required, leave the Amount field blank.

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See Also

HECM Financial Assessment - Business Background

HECM Financial Assessment Page - Field Descriptions

HECM Financial Assessment Update Page - Field Descriptions

HECM Financial Assessment Results Page - Field Descriptions

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Last revised: October 23, 2023