The Department of Housing and Urban Development (HUD) has announced changed to its Home Equity Conversion Mortgage (HECM) program.
In a statement
issued by HUD, the department noted that the initial mortgage insurance premium (MIP) will become two percent of the maximum claim account, effective on Oct. 2. This is a revision from a previous schedule of either 2.5 percent for higher draws or 0.50 percent for lower draws.
“HECM’s annual MIP will be 0.50 percent of the outstanding mortgage balance, reduced from the prior schedule for all borrowers from 1.25 percent,” the HUD announcement added. “This change provides fee relief for all borrowers in the program, and preserves more equity for borrowers over time by slowing the rate at which the loan balance grows.”
HUD is also planning to announce new Principal Limit Factors (PLFs), the amount that seniors can draw on their reverse mortgages, although no date was set on when that announcement would be made.
HUD Secretary Dr. Ben Carson announced the changes on Twitter
. “Given the losses we’re seeing in the HECM program, we have a responsibility to make changes that balance our mission with our future responsibility to protect taxpayers,” he tweeted.
David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), welcomed the news from HUD. “MBA applauds the announcement by HUD that it is modifying premiums and distribution limits in the HECM program, moves designed to strengthen the FHA fund and lessen risk to taxpayers,” he said. “Reverse mortgages are an important financial product for our nation’s seniors, but the program needs to remain financially viable if it is to continue to offer its benefits into the future.”