May 19, 2016
The FHA has announced a new proposed rule intended to strengthen the Home Equity Conversion Mortgage (HECM) loan program.
According to the FHA official site, the proposal would “codify several significant changes to FHAs Home Equity Conversion Mortgage program that were previously issued under the authority granted to HUD in the Housing and Economic Recovery Act of 2008 and the Reverse Mortgage Stabilization Act of 2013, and to make additional regulatory changes”.
A press release at FHA.com states the new rule would, once approved, “make certain FHA-insured reverse mortgages remain a viable and sustainable resource for senior homeowners hoping to remain in their homes and age in place.” The agency has spent the last two years working on reforms intended to improve the FHA HECM program.
“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes where they’ve raised families and where they hope to live out their days,” said Ed Golding, Principal Deputy Assistant Secretary for Housing at the U.S. Department of Housing and Urban Development, who was quoted in an FHA/HUD press release. “As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure, and sustainable financial option for future generations of senior homeowners.”
The new proposed rule would include more consumer protections as described in the press release:
-Make certain that required HECM counseling occurs before a mortgage contract is signed;
-Require lenders to fully disclose all HECM loan features;
-Cap lifetime interest rate increases on HECM Adjustable Rate Mortgages (ARMs) to five percent.
-Reduce the cap on annual interest rate increases on HECM ARMs from two percent to one percent;
-Require lenders to pay mortgage insurance premiums until the HECM is paid in full, foreclosed on, or a Deed-in-Lieu (DIL) is executed rather than until when the mortgage contract is terminated;
-Include utility payments in the property charge assessment; and
-Create a cash for keys program to encourage borrowers to complete a DIL and gracefully exit the property versus enduring a lengthy foreclosure process.
Read more about the proposed rule on FHA HECM loans via this downloadable PDF available from the FHA/HUD official site: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-11631.pdf
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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