More money for older HECM borrowers, substantially less when younger non-borrowing spouse present
Today HUD released new PLFs (Principal Limit Factors) which now include a table for younger co-borrowers. Jerry Wagner, the President & owner of IBIS Software which provides origination software and information for both HUD and HECM Lenders released a very helpful comparison chart (see downloads below) which helps identify the impact of the new lending ratios.
Here is a summary of the changes:
- HUD made the changes via Mortgagee Letter 2014-12
- Younger primary borrowers will see a modest increase in their PLFs until the Expected Rate reaches 5.37% and higher (see inset below).
- Older borrower will see a substantial increase in proceeds until the Expected Rate nears 7% and higher
- The new Principal Limit Factors go into effect for FHA case numbers assigned on or after August 4th, 2014
- Borrowers who have not closed their loans and have FHA case numbers prior to August 4th may opt to use the new PLFs (see ML 2014-14 for requirements)
- The table for younger non-borrowing spouses (18-61 years old) only applies if at least one borrower meets the minimum HECM age requirement of 62. Proceeds will be based on the age of the youngest spouse.