The Federal Housing Administration is consolidating its fixed-rate programs for federally insured reverse mortgages.
The Standard Fixed-Rate Home Equity Conversion Mortgage and Saver Fixed Rate HECM pricing options are being consolidated.
HECM Saver will be the only fixed-rate option for initial mortgage insurance premiums on home-equity conversion mortgages.
The update was announced Wednesday by the U.S. Department of Housing and Urban Development in Mortgagee Letter 2013-01l.
The initial premium will remain at 0.01 percent of the maximum claim amount, while the annual mortgage insurance premium will remain at 1.25 percent.
HUD said that the move was made “to help sustain the HECM program as a viable financial resource for aging homeowners and to strengthen the Mutual Mortgage Insurance Fund.”
As she sought Senate confirmation, Federal Housing Commissioner Carol J. Galante in December said in a letter to Sen. Bob Corker (R-Tenn.) that standard, fixed-rate HECMs would be eliminated. In addition, the planned change was discussed in FHA’s annual report to Congress
Borrowers who prefer the HECM Standard initial MIP option are limited to adjustable-rate mortgages.
“Mortgagees shall continue to use the HECM Saver principal limit factor table that has been in effect since October 2010,” the letter stated, “and all other provisions of Mortgagee Letter 2010-34 remain in effect”
The new guidance impacts all fixed-rate case numbers assigned on or after April 1.
