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MortgageMomma

First HECM as the lead MLO. Client was 71, widow, $820k home in Colorado Springs, wanting a line of credit for healthcare reserves. Closed in 42 days. Lessons below.

Day 1-3: HUD counseling certificate must be in hand BEFORE we can take application. This is federally required. Sent her to Money Management International (about $125, sometimes waived for lower-income). Took her 5 days to schedule.

Day 7: Application taken after counseling cert received. Ran financial assessment: 2 years tax returns, credit, property tax & insurance payment history. She had a 30-day late on her homeowners insurance 18 months prior → triggered a LESA (life expectancy set-aside) — $28,000 held back from her available proceeds to cover future T&I.

Day 14: Appraisal ordered through FHA Appraisal Portal (different from traditional). Appraiser must be on FHA roster. Came in at $815k — fine.

Day 21-35: Underwriting. Biggest holdup: she had a non-borrowing grandson living with her. Non-borrowing resident occupancy rules required an executed understanding that he has no occupancy rights post-event. Took 2 weeks to get him to sign because he was traveling.

Day 38: Closing docs out. HECM has a mandatory 3-business-day right of rescission AFTER signing — funds do not release until day 4+.

Pitfalls to avoid on your first: (1) LESA surprises — pull insurance & tax payment history first, (2) non-borrowing residents — document day one, (3) counseling cert expires in 180 days — do not let it lapse, (4) explain the line-of-credit growth feature in writing — it is the #1 value of HECM and most clients do not understand it until you show them the amortization.

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Jon Howard

Thanks for the write-up — the 42-day HECM timeline is actually a clean run. A few things I would flag for any LO taking their first HECM file:

  • HUD counseling certificate is the door-opener. No lender can even pull credit until it is in hand. Get the borrower a list of HUD-approved counselors (the HUD.gov list is the safest compliance answer) on day 1.
  • FHA appraisal protocol — HECM appraisals follow stricter property-condition standards than conventional. Any peeling paint, missing handrails, or exposed wiring becomes a condition. Pre-walk the property with the borrower before ordering.
  • Second appraisal trigger — HUD's Mortgagee Letter 2018-06 requires a second appraisal on ~10% of HECMs based on a HUD collateral review. If yours gets flagged, it adds 7–10 days. Budget it into your timeline promise.
  • Rescission right — HECMs have a 3-business-day rescission AFTER closing. Funds do not wire until rescission expires. Not a surprise, but first-time HECM borrowers sometimes expect same-day funding like a purchase.
  • Non-borrowing spouse education — if the spouse is under 62, walk them through Mortgagee Letter 2014-07 protections IN WRITING with the borrower. This prevents the family-meeting regret moment 6 months later.

Practical next step: Build a HECM-specific 45-day timeline with the 5 checkpoints above marked. Share it with borrower + family at application. Sets expectations and positions you as the expert from day 1.

Happy to run your specific numbers — call 970-457-9107 or email jon@homesteadcapitalpartners.com.

NMLS #2587985 · Licensed Colorado · For educational purposes — not a commitment to lend.

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Maya Thompson

Junior here at CU Denver, interning with Jon's team this semester — I sat in on the HECM counseling portion of one of these files last month and the "have the family Zoom in" tip came up organically. The adult kids went from arms-crossed-skeptical to relieved within 20 minutes because the counselor (not the lender) was the one laying it out. From a social/content angle, a reel of "questions to ask at HUD counseling" would probably save families a lot of repeat convos.

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Riley O'Sullivan

Ran my team's first HECM walkthrough on our YouTube last month — the 45-day timeline breakdown with every checkpoint is in there if anyone wants a reference. Jon's 10% second-appraisal trigger is the one that catches new LOs off guard. Pre-warning the borrower at application changes the conversation from "something's wrong with my house" to "this is a HUD quality control check." Same words, very different emotional load. The HUD counseling cert being CC'd to you directly is another small-but-huge tip — don't skip it.

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Miguel O.

Closed my 4th HECM last month and every one of the checkpoints Jon lists has cost me at least a day at some point. The second appraisal trigger is the one that still surprises me — the first two times it happened on my files, I had to call the borrower to push closing back and it's an awkward conversation ("your home might be worth less than we thought, HUD is making us double-check"). Now I warn every HECM borrower at application that a second appraisal is possible on ~1 in 10 files, and if it happens it's not a sign anything is wrong.

The non-borrowing spouse education piece is the one I feel strongest about. My second HECM had a younger spouse (58) and I spent a full hour walking through Mortgagee Letter 2014-07 protections with both of them, in writing, with the borrower initialing each section. Six months later the borrower passed unexpectedly and the spouse was able to stay in the home. If I'd skimmed that meeting, the grief on top of housing confusion would have been a disaster.

One addition: get the HUD counseling certificate emailed to you directly, not just to the borrower. More than once a borrower has told me "I did it, I don't know where the certificate is." Having the counselor CC you saves that whole conversation.

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