Tag Archives: home equity conversion mortgage

HECM Cap Suspended

12 Mar

The House of Representatives passed a continuing resolution last week to suspend the cap on the number of reverse mortgages insured by the FHA.  This suspension is through the end of the Fiscal Year, or September 30, 2013.

The cap is currently set at 275,000 loans.  It has been suspended several times in the past 5 years.  The cap has been raised from 2,500 loans in 1990 to 25,000 loans by the end of 1995. Subsequent raises of the cap led to its current level, set in 2006.

Date Set For Elimination OF HECM Fixed Standard

5 Feb

The FHA has finally set the date for the discontinuation of the Fixed Standard HECM (Home Equity Conversion Mortgage) reverse mortgage.

Per MORTGAGEE LETTER 2013-1 from HUD, all fixed interest rate case numbers assigned on or after April 1, 2013 can be SAVER products but no longer Standard HECMs.

Read the Mortgagee letter here:

http://portal.hud.gov/hudportal/documents/huddoc?id=13-01ml.pdf

All fixed interest rate mortgages that were assigned a FHA case number on or before March 31, 2013, may be processed as either a HECM Standard or HECM Saver as the initial MIP; but any fixed interest rate HECM Standard mortgage must close on or before July 1, 2013.

There has been much discussion in online reverse mortgage forums as to the value of this change.  Some applaud the move, while others question whether it will make a difference.  One motivation for the change was the depleted state of the FHA insurance reserves in a declining housing market.  But will depriving senior borrowers of one avenue for reverse mortgage financing hurt them?

FHA Update

16 Nov

There are a number of newsworthy reports out about the FHA.  Here are two that may impact loan originators at the start of the new year:

First, new lending limits will be announced before the end of the year.  A new mortgagee letter will be issued setting the 2013 loan limits.

Second, the results of the FHA audit were published this week, valuing their insurance fund at negative $13.48 billion.    FHA’s reverse mortgage (Home Equity Conversion Mortgage) Portfolio will be valued at negative $2.799 billion at the end of fiscal year 2012.

The Wall Street Journal speculates that the agency is likely to require taxpayer funding to pay for expected losses on the $1.1 trillion in loans that it guarantees.  There is a fear that this will mean an increase in FHA mortgage insurance premiums.  As soon as this information is released, we will post it here.

What Might Proposed New LO Comp Do To Reverse Mortgage Compensation?

31 Aug

Earlier this month, the Consumer Financial Protection Bureau proposed new guidelines for Loan Officer compensation.  Their purpose, as stated, is to simplify fees and discount points as presented to borrowers.  The problem is, the Federal Housing Administration’s Home Equity Conversion Mortgage program does not allow for discount points, and eliminating origination fees could cause an increase in the loan’s interest rate, resulting in fewer funds available for the borrower.

With respect to reverse mortgages, the CFPB clarified interpretation of “amount of credit extended” as it related to compensation. The CFPB specifies the “initial principal limit” rather than the “max claim amount” is the interpretation to be used.

Because government-insured reverse mortgages fall under many of their own rules under the Department of Housing and Urban Development and Federal Housing Administration, the industry has asked for reverse mortgage exceptions with many of the rules that are currently being made.

The current rule making is open for comments through October 16, with a final rule expected in January 2013.