HUD Issues New Tweaks For Senior Loans
January 9th, 2008
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HUD has come out with two interim rules which would impact the HECM program if finalized.
In general terms, the first new rule for federally-insured reverse mortgages “extends the date for calculating the maximum claim amount in the HECM program from the date of the underwriter’s receipt of the appraisal report to the date of closing. This change provides a more easily verifiable and more easily identifiable date.”
I’m actually surprised about this approach because it would be better still to start the clock running from the date of recordation, something which is officially recorded and — in most states — easily checked.
The second new rule, says HUD, “corrects an unintended consequence that results in a situation where HECM loans that are not in default but have been assigned pursuant to regulatory provisions, and remain in effect, are not eligible to be refinanced with a discounted initial mortgage insurance premium (MIP). This rule would permit such HECM loans to be eligible for the discounted
initial MIP upon refinancing, in accordance with the purpose of the HECM program, which is to improve the financial situation of elderly homeowners.”
In other words, senior borrowers are allowed to refinance into a new reverse mortgage at a lower MIP rate.
The need for the second rule, according to HUD, is that “the intent of the HECM program is to improve the financial situation or otherwise meet the needs of elderly homeowners (12 U.S.C. 1715z–20(c)(1)). It is clear from the face of the statute that the authorization for a reduced MIP was intended to apply to all refinancings of existing HECM loans originated with HUD insurance, not only ones ‘‘presently insured.’’ Section 1715z–20(k)(1), refers to ‘‘any mortgage given to refinance an existing home
equity conversion mortgage insured under this section [emphasis added].’’Section 1715z–20(k)(4), in turn, permits reduced MIPs for ‘‘a mortgage financed and insured under this subsection.’’ The
statute does not provide an exception for non-defaulted loans assigned, essentially, to protect the elderly mortgagor.”
For the entire posting in the Federal Register, press here.
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