FHA Proposes to Improve, Strengthen Reverse Mortgage Program
FHA this week proposed a new rule to strengthen its Home Equity Conversion Mortgage Program.
The proposed rule (https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-11631.pdf) would codify several changes to the FHA HECM program that were previously issued under the authority granted to HUD in the Housing and Economic Recovery Act of 2008 and the Reverse Mortgage Stabilization Act.
HUD Principal Deputy Assistant Secretary for Housing Ed Golding said in addition to formalizing many of the structural improvements announced recently, the proposed rule is intended to make certain FHA-insured reverse mortgages remain a viable and sustainable resource for senior homeowners hoping to remain in their homes and age in place.
“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes where they’ve raised families and where they hope to live out their days,” Golding said. “As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure and sustainable financial option for future generations of senior homeowners.”
The HECM program is FHA’s reverse mortgage program that enables seniors who have equity in their homes to withdraw a portion of the accumulated equity. The intent of the Home Equity Conversion Mortgage program is to ease the financial burden on elderly homeowners facing increased health, housing, and subsistence costs at a time of reduced income.
These proposed changes include:
–Make certain that required HECM counseling occurs before a mortgage contract is signed;
–Require lenders to fully disclose all HECM loan features;
–Cap lifetime interest rate increases on HECM Adjustable-Rate Mortgages to 5 percent.
–Reduce the cap on annual interest rate increases on HECM ARMs from 2 percent to 1 percent;
–Require lenders to pay mortgage insurance premiums until the HECM is paid in full, foreclosed on, or a Deed-in-Lieu is executed rather than until when the mortgage contract is terminated;
–Include utility payments in the property charge assessment; and
–Create a “cash for keys” program to encourage borrowers to complete a DIL and gracefully exit the property versus enduring a lengthy foreclosure process.
More information about the FHA HECM Program can be found at http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmabou.
