With the recent release of HUD’s Financial Assessment guidelines our focus was primarily centered on the new requirements future borrowers will have to walk through to qualify for a federally-insured reverse mortgage or Home Equity Conversion Mortgage…
Continue readingDo Rising Interest Rates Trigger Slower Home Appreciation?
As loan interest rates rise banks & lender’s refinance business will dwindle forcing them to loosen lending standards to compete for potential borrowers. While this mostly applies to traditional mortgage lending relaxed lending standards result in more qualified buyers increasing housing demand and prices alike.
Continue readingOur Industry’s Choices will Determine our Future
Due to economic and regulatory pressure the HECM program has evolved rapidly in recent years. The truth is the choices that our industry collectively makes today will determine the outcome of tomorrow. What changes can we anticipate in the coming year?
Continue readingNon-Borrowing Spouse Pitfalls?
Non-Borrowing Spouse Pitfalls. As with any new policy often more questions arise than answers. HUD’s recent Non-Borrowing Spouse policy is no exception to this rule. While benefiting younger spouses with the peace of mind of being able to remain in the home after the death of their spouse what pitfalls and problems can arise?
Continue readingAn Ounce of Prevention?
Preventative Measures: Curbing Technical Defaults. An old saying reminds us “ An ounce of prevention is worth a pound of cure.” When it comes to technical defaults for HECM borrowers we may be seeking a cure but there are some preventative measure that can be taken today.
Continue readingNon-Borrowing Spouse Policy: A Wrench in the Gears?
What may have gone unnoticed by some may in fact turn out to be one of the most momentous policy decisions in the history of the HECM program: the non-borrowing spouse provision.
Continue readingThe Non-Borrowing Spouse Surprise?
The Home Equity Conversion Mortgage or HECM program still only allows borrowers 62 or older but now adjusts proceeds based on the age of the younger non-borrowing spouse. In essence it gives the non-borrowing spouse the right to remain in the home indefinitely during a ‘deferral period’ provided requirements are met. That said there are a few key points we must now to fully comprehend the benefit and risks of this policy change…
Continue readingNEW Principal Limits Demystified
Last week we saw two watershed events for the federally-insured reverse mortgage program. Revised Principal Limit Factor tables and the inclusion of younger non-borrowing spouses under the age of 62. The pace of changes to the HECM program has been swift with FHA’s new authority to make substantial changes via Mortgagee Letter rather than the lengthly rule-making process.
Continue readingBREAKING: New PLFs Released
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.
DOWNLOADS:
NEW 2014 PLF Table PLF Change Analysis (IBIS Software) Mortgagee Letter 2014-14
The Mission Remains
Over the last several years we have seen HUD reshape the landscape of reverse mortgage lending. Reduced principal limit factors, first year distribution limits and the upcoming financial assessment leave some wondering if we will be able to serve senior homeowners who will truly need our services…
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