The Federal Housing Administration (FHA) recently announced new Home Equity Conversion Mortgage (HECM) program requirements with the release of Mortgagee Letters 13-27 and 13-28. The revisions in Mortgagee Letter 13-27 include the following:
►Restrictions on the amount of HECM funds that can be disbursed at closing and over the first 12 months following loan closing;
►Revised mortgage insurance premiums (MIPs) and principal limit factors;
►Introduction of the new single distribution lump sum payment option;
►A required Financial Assessment for all HECM mortgagors focused on evaluating willingness and capacity to meet their financial obligations and the terms of the HECM; and
►Required set aside of a portion of the loan proceeds or withhold of a portion of the Line of Credit or Term/Tenure payments for the payment of property taxes and insurance.
The FHA recently held a conference call to go over these recent changes to HECM in greater detail, highlighting common concerns while also offering a bit more information regarding the HECM program, overall. The new HECM guidelines “set limits of what can be dispersed. It’s critical borrowers understand the limits of potential disbursement,” said Charles Coulter, HUD Deputy Assistant Secretary for Single Family Housing.
Those on the call were quick to discuss the training that many would have to go through in order to become up to snuff on the recent changes, however; they didn’t indicate how long that training would be. Coulter also dodged the question of empirical evidence supporting whether or not the changes to the HECM program would aid or hinder the mortgage industry. “Many in the industry are better prepared to answer the question as to whether or not this is a sustainable program,” Coulter said. “We recognize that sections of the market as we know it will be, essentially, carved out and that the industry will have to adapt to that change.”