Earlier this week, the Federal Housing Administration (FHA) proposed a fresh set of guidelines for the Home Equity Conversion Mortgage (HECM) for Purchase (H4P) program. Highlighted in the Federal Register, the new guidance suggests allowing an "interested party contribution" of up to 6% of the sales price.
"It's a good thing," Nick Rosynek, regional sales and marketing director for Moneyhouse, told NMP. "It could help more borrowers and is signaling this is not a forgotten part of the industry."
In context, the H4P has historically had a low adoption rate, only accounting for about 1-2% of the broader mortgage industry.
The term "interested party contribution" refers to payments made by any party or combination of parties directed towards the borrower’s origination fees, closing costs, prepaid items, and discount points.
It would align with forward mortgages and "help a lot of folks who are shy maybe $25,000," Rosynek said.
Aiming to harmonize the H4P program with other FHA forward programs, this new guidance could be a game-changer. This means H4P borrowers might soon have the chance to receive up to six percent of the sales price from entities such as sellers, builders, real estate agents, and others involved in the transaction.
A significant aspect of the proposal is the potential inclusion of premium pricing in the HECM program. If approved, this would mark its debut in the program. As per the Federal Register notice, this could allow HECM for Purchase borrowers to benefit from premium pricing, leading to reduced closing costs in return for an agreed initial mortgage interest rate.
The FHA is now inviting feedback on this proposal, with the review period open until Nov. 24.
