HUD tightens reverse mortgage rules WASHINGTON – Sept. 5, 2013 – Major changes are coming to the Department of Housing and Urban Development’s (HUD) reverse mortgage loan program as the agency seeks to shore up its finances and better protect seniors. The Home Equity Conversion Mortgage Program’s (HECM) two products, the standard and saver options, are being consolidated into one program with tighter restrictions and a bigger education component. The changes are the result of reforms in the Reverse Mortgage Stabilization Act of 2013, passed by Congress and signed last month by President Barack Obama. Last November, the Federal Housing Administration warned that changes in how consumers were using reverse mortgages had strained its Mutual Mortgage Insurance Fund, and the agency faced a $2.8 billion loss from the program. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for seniors that will allow them to age in place in their own homes,” said Federal Housing Commissioner Carol Galante in a statement announcing the changes. The department detailed the changes in a letter to mortgagees posted Tuesday on its website. The HECM program was designed to let homeowners 62 and older borrow against the equity in their home and receive the proceeds through a line of credit, monthly payments or a lump sum. Unlike other loans, consumers make no payments, but when the homeowner sells, moves or dies, the loan must be repaid. Homeowners must pay property taxes, insurance and interest that accrue on the principal. In recent years, the age of borrowers taking out the loans edged downward and more chose to receive a lump-sum payment, worrying consumer advocates that homeowners would burn through the proceeds. The Consumer Financial Protection Bureau highlighted its concerns about the program a year ago in a 231-page report. Beginning Oct. 1, borrowers will, at the loan’s closing, be able to take 60 percent of the principal limit, or they can take enough to cover mandatory fees such as those tied to the loan or federal debt owed, plus 10 percent of the principal limit, whichever is greater. Also, the more a borrower takes out in the first 12 months of the loan, the higher the mortgage insurance premiums. Beginning Jan. 13, borrowers also will have to go through a detailed credit history analysis and financial assessment as part of the loan process, to ensure they will have the funds necessary to pay other obligations related to their homes, like real estate taxes, homeowners association fees and property insurance. Copyright © 2013 the Chicago Tribune. Distributed by MCT Information Services
Posted on: Mon, 09 Sep 2013 15:09:30 +0000
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