Reverse Mortgage Changes on the Way!
The FHA has just released Mortgagee Letters 13-27 & 13-28 dealing with changes to the way Reverse Mortgages, also known as Home Equity Conversion Mortgages (HECM), will be handled in the future.
The first changes will become effective with HECM loans that have case numbers assigned beginning on September 30, 2013. These changes will effect: Initial Disbursement Limits; Single Disbursement Lump Sum Payment Options; Initial Mortgage Insurance Premiums; Principal Limit Factors; and Initial Mortgage Insurance Premium Calculations on refinance transactions.
Among the changes, these rules do away with the "HECM Saver" and HECM Standard". There are also new ways of calculating what the maximum amount that can be borrowed is. It also limits the amount of the available loan total which can be pulled out of the loan in the first 12 month - generally to about 60% of the possible loan total.
Additionally, there are other changes that take effect for case numbers assigned on or after January 13, 2014. These changes apply to the Financial Assessment Requirements, and Funding Requirements for the Payment of Property Charges. In ther past, those who took out HECMs did not have to meet credit or income requirements. Due to the failure of numbers of these previous loans to go into foreclosure due to failure to make their required tax or insurance payments. Depending on the findings of the Financial Assessment, there may be requirement that mortgagees mandate the use of mortgage proceeds or establish a life expectancy set-aside to fund property charge payments where the results of the financial assessment required by 24 CFR § 206.37 warrant it.
This is just a quick overview - since ML 13-27 runs to forty pages (40), and the attachment to ML 13-28 is 59 pages long. Lenders will be thoroughly reviewing all this material in the coming weeks, and we will surely be getting further details, as they become clear.
These changes will change the landscape on Reverse Mortgages, and if someone is thinking of getting one, it might be considerably easier now rather than later.
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