HECM Guidelines Revised

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MORTGAGE EXPERT
1 · 03 · 13

The Department of Housing and Urban Development has issued new policies for federally insured reverse mortgages that are intended to help stop the program from bleeding.

New guidance released Tuesday for home-equity conversion mortgages is intended to manage risk for the Federal Housing Administration.

HUD said that the revisions are part of its continuing efforts to reform, strengthen and protect FHA’s Mutual Mortgage Insurance Fund.

The agency explained that major changes in demographics and borrower preferences have added significant risks to the MMI fund.

Changes included a shift from adjustable-rate mortgages with access to the line of credit or modified tenure/term payment options to fixed-rate mortgages where all available funds are drawn down at closing.

“Younger borrowers with more indebtedness and stagnant home prices have also contributed to the added risk,” HUD said.

Mortgagee Letter 2013-27 outlines changes to HECM program requirements.

The changes impact initial disbursement limits, new single-disbursement lump sum payment options and new principal limit factors.

Also impacted are initial mortgage insurance premiums, including for refinance transaction, and financial assessment requirements.

In addition, Mortgagee Letter 2013-27 outlines funding requirements for the payment of property charges based on the financial assessment.

Some of the changes go into effect on Sept. 30, while others impact case numbers assigned on or after Jan. 13, 2014.

HUD also released Mortgagee Letter 2013-28, which provides parameters for the required financial assessment outlined in Mortgagee Letter 2013-27.

“The changes being announced today will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” Federal Housing Commissioner Carol Galante said in a written statement. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for seniors that will allow them to age in place in their own homes.”

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