How this looks in practice

The cleanest way to use this rule is to identify the document trail before the borrower relies on the number in a budget. For a Los Angeles borrower, the example is this: If a borrower is using $100,000 from a traditional IRA (taxable) to qualify for income, the underwriter will only count $85,000 of it, but if they use $100,000 from a Roth IRA (non-taxable), the full $100,000 is counted.

The cited material does not list a separate downside for this item, but a complete file still has to satisfy the rest of the program requirements.

Key numbers

• 85% (as of 2026)
• 100% (as of 2026)

That figure determines how the underwriter discounts the asset for residual income rather than how much money the homeowner actually owns.

How this looks in practice

A borrower can avoid confusion by asking whether the issue belongs to the person, the property, or the product guideline. For a Los Angeles borrower, the example is this: A senior with several thousand dollars in unpaid hospital bills in collection can still pass the financial assessment without penalty, as medical debt is completely excluded from the LESA assessment.

No special risk note is attached to this fact, which makes accurate documentation the main practical concern.

Key numbers

• No standalone threshold listed for hecm-medical-collections-excluded in the cited fact.

The lack of a numeric threshold is useful by itself because it means the answer turns on classification, not a dollar cutoff.

How this looks in practice

The practical checkpoint is not whether the rule sounds reasonable; it is whether the file proves the requirement in the form the lender needs. For a Los Angeles borrower, the example is this: A borrower who missed a mortgage payment 18 months ago will have that counted against their credit test because housing history requires a 24-month clean lookback.

The practical downside is specific: Failing the housing credit test may result in a mandatory Life Expectancy Set-Aside (LESA) or loan denial. A borrower can still explore options, but this risk should be discussed before estimates are treated as dependable.

Key numbers

• 24 months (as of 2026)

A 24-month window can reach farther back than borrowers expect when they are focused only on recent account activity.

How this looks in practice

Local equity does not remove the need for a clean guideline match, especially when family members are trying to estimate available proceeds. For a Los Angeles borrower, the example is this: If a borrower had credit card late payments two years ago but has been clean for the last 12 months, those older lates will not trigger a major derogatory finding for revolving credit.

The absence of a listed downside should not be read as automatic approval; it only means this fact is one part of the larger review.

Key numbers

• 12 months (as of 2026)

A 12-month revolving-credit review is shorter than the housing-history window, so the two categories should not be mixed together.

How this looks in practice

This requirement belongs on the early checklist because it is harder to correct after pricing, counseling, and appraisal steps are underway. For a Los Angeles borrower, the working example is the question “How do my retirement accounts count toward my income qualification”; the answer should be confirmed against the exact HomeSafe product, state rules, property value, and underwriting requirement before the family relies on it.

With no separate warning in the cited evidence, the safest move is to confirm product fit and keep the explanation simple.

Key numbers

• 100% (as of 2026)
• Revised April 2026 (as of 2026)

The 100% figure is specific to non-taxable assets under the cited HomeSafe asset dissipation rule.