HUD issues HECM for purchase guidelinesMortgagePress.comHUD, HECM for purchase, reverse mortgage, HECM, NRMLA, FHA, Housing and Economic Recovery Act of 2008
The National Reverse Mortgage Lenders Association has announced
that the U.S. Department of Housing and Urban Development (HUD) has
issued guidelines for the purchase of homes by seniors utilizing
the FHA-insured Home Equity Conversion Mortgage (HECM) program.
Under amendments to the HECM program recently enacted as part of
the Housing and Economic Recovery Act (HERA) of 2008, qualifying
buyers will be able to purchase new homes with reverse mortgages,
thus avoiding taking on any monthly mortgage payments as part of
the transaction. The program will take effect on Jan. 1, 2009.
"The HECM for Purchase adds an interesting new option for anyone
over 62 years old looking to relocate into a new home that can
better fit their needs in years to come," said Peter Bell,
President of NRMLA. "Proceeds from the sale of their former home
can be combined with funds from a reverse mortgage on the new home,
allowing the home purchase to be made without the future
responsibility of monthly mortgage payments."
The new guidelines for the HECM for Purchase program
• HECM borrowers must occupy the property within 60 days
from the date of closing.
• Lenders are required to ensure all outstanding or unpaid
obligations incurred by the prospective mortgagor, in connection
with the HECM transaction, are satisfied at closing.
• Only properties where construction is completed are
• Ineligible property types include: cooperative units;
boarding houses; bed and breakfast establishments; existing
manufactured homes built before June 15, 1976; and existing
manufactured homes built after June 15, 1976 that fail to conform
to the Manufactured Home Construction Safety Standards.
• At closing, the home buyer/HECM borrower must provide
funds to cover the difference between the HECM principal limit and
the sales price for the property, plus any HECM loan related fees
that are not financed or offset by other allowable FHA funding
• Borrowers may not obtain a bridge loan (also known as
"gap financing") or engage in other interim financing methods to
meet the monetary investment requirement or payment of closing
costs needed to complete the purchase transaction.
• HUD-approved housing counseling agencies that have been
approved to provide reverse mortgage counseling, must counsel those
who anticipate using the HECM for Purchase option.
For the complete list of guidelines and provisions, please visit
the NRMLA Web site at www.nrmlaonline.org.
New loan limits
As part of the Housing and Economic Recovery Act of 2008, HUD
recently approved a single national loan limit of $417,000 for
federally insured HECM reverse mortgages which went in to effect on
The new, higher lending limit will enable borrowers to obtain a
greater benefit if their home value is higher than the previous HUD
limit. Previously, the HECM program assigned different lending
limits by county ranging from $200,160 in rural areas to $362,790
in the highest home value areas.
Similarly, existing borrowers whose home value is greater than
the new HUD limit may be able to increase their benefit by
refinancing their reverse mortgage.
For more information, visit www.reversemortgage.org.