Are disputed derogatory credit accounts included in the expense analysis for a Home Equity Conversion Mortgage (HECM) Borrower?

Disputed derogatory credit accounts refer to disputed charge off accounts, disputed collection accounts, and disputed accounts with late payments in the last 24 months.

If the borrower has $1,000 or more collectively in disputed derogatory credit accounts, the Mortgagee (lender) must include a monthly payment in the expense analysis.

The following items are excluded from the expense analysis:
  • disputed medical accounts; and
  • disputed derogatory credit resulting from identity theft, credit card theft or unauthorized use.
Non-derogatory disputed accounts include the following types of accounts:
  • disputed accounts with zero balance
  • disputed accounts with late payments aged 24 months or greater
  • disputed accounts that are current and paid as agreed
If a HECM borrower is disputing non-derogatory accounts, or is disputing accounts which are not indicated on the credit report as being disputed, the Mortgagee must analyze the effect of the disputed accounts in the expense analysis.  If the dispute results in monthly payments being less than the amount indicated on the credit report, the mortgagor must provide documentation of the lower payment.

For additional information see Mortgagee Letter 2016-10 and the attached revised HECM Financial Assessment and Property Charge Guide, Section 3.87 and 3.88 at

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04946