BREAKING: Major HECM Changes Announced

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HECM-to-HECM Refis Nixed, Appraisal Scrutiny & More

Late last Thursday afternoon we received word that the Department of Housing and Urban Development (HUD) in cooperation with the Treasury Department presented President Donald Trump with their plan for reforming the Nation’s housing finance system and the Home Equity Conversion Mortgage program. This was in response to President Trump’s March 2019 memorandum for housing finance reform.

First the good news- there are no indications of further HECM principal limit factor (PLF) reductions or dropping the current interest rate floor. Second- you may want to watch the current national lending limit for federally-insured reverse mortgages. HUD is recommending Congressional approval to…

 

4 comments

Jay Allen Kaplan September 9, 2019 at 7:58 am

Who is NRMLA and where are they when we need them?

Reply
Demas Lamas September 9, 2019 at 11:47 am

One of the benefits of a HECM to HECM these days goes beyond a borrower pulling out $30,000 to $50,000 because their home value
has appreciated. With swap rates so low and using margins at 1.5 to 2.0, we’rre seeing dramatic rates drops ib the 1-year ARM.
One of my clients is going from a 2.875% margin to 1.75% margin. And she’d be reducing her monthly MI from 1.25% to 0.50%. The trifecta of lower LIBOR rates, lower margins, and lower MI combines to reduce her interest cost from 7.18% to 4.19– an eye grabbing 3% less or $12,000 “benefit” to the borrower in year 1 of a HECM to HECM.

So now FHA wants to dump the HECM to HECM because it’s too risky to reduce rates by 3%! What’s good for the goose is good for the gander–
how about we eliminate ANY FHA refinances–you know the ones– the benefit is the rate going down 1/4% and the upfront MI is financed,
and the cashout is limited to 80%.

Seems like our seniors are not entitled to the benefit of refinancing their HECMs when the opportunity shows itself.

Reply
Tom O'Donoghue September 9, 2019 at 12:26 pm

Do we have any expected time frame of when the legislated items are to take effect?

Reply
Shannon Hicks September 9, 2019 at 1:07 pm

Presently we do not. Conceivably, some administrative changes could be enacted before the new fiscal year. Congressional changes are a true toss-up.

Reply

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