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…
Continue readingHarnessing the Winds of Change
A Chinese proverb admonishes “When the winds of change blow, some people build walls and others build windmills.” More than ever before we should ask ourselves if we are building walls to protect against the evolution of our industry or are we preparing to harness the momentum of change?
Continue readingNew HECM Products Nixed
There was a rush to market by a handful of lenders to offer fixed rate variant products which still fell within the guidelines of the federally insured reverse mortgage or HECM program. While FHA has not directly addressed these new products Ginnie Mae has.
Continue readingTop 3 Changes to Prepare For
We are one third of our way through the year. It’s a brave new world in reverse mortgage lending. Beyond the headlines we see four major changes we should be preparing for…
Continue readingNew Products & Client Need
There is a new race in our industry. In the last three months we have seen four new fixed rate HECM product variants introduced. Innovation can be a positive force in our industry but it does come with its risks…
Continue readingThe Young & the Restless
During a January 16th meeting of the National Reverse Mortgage Lenders Association’s Executive Committee, Deputy Assistant Secretary Charles Coulter said to expect a mortgagee letter in the coming weeks regarding non-borrowing spouses. Coulter said “The first ML will essentially require that in the case of a non-borrower spouse, the age of the younger member of the couple will be utilized to determine the appropriate PLF [principal limit factor]. HUD will be modifying the PLF tables to cover ages below 62 for this purpose.”
Continue readingAgainst The Wind
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2014 Presents Challenge & Opportunity for HECM Industry
The classic Bob Seger song laments, “Against the wind. I’m older now but still running against the wind.” Both retirees and our industry are pressing against the resistance of retirement funding and a more restrictive product for us to offer. The good news is that the reverse mortgage industry and the HECM product have proven their staying power having endured one of the worst housing crashes in history, an economic crash and numerous product changes. Also increasing home values have buoyed production with an increase of 15% through November.
The next headwind will be felt once HUD enacts the financial assessment in it’s effort to reduce risks of borrower defaults and subsequent claims against FHA’s insurance fund. But are some of these recent developments a blessing in disguise? Columnist Phil Hall in the National Mortgage Professional Magazine says yes. Hall says, “A new oversight regimen may finally help to erase the lingering doubts surrounding the product.” If we look at the true obstacle for market growth it’s not the 15% reduction in principal limits, the elimination of the Standard Fixed rate or increased insurance premiums. It’s our industry’s reputational woes. Hall cites one originators experience…
Tightening HECM Guidelines Opens Door for Private RMs
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Increasing Restrictions & Possible Lower Lending Limits May Spur the Return of More Proprietary Loans
Having absorbed the recent elimination of federally-insured reverse mortage products, principal limit reductions and increased underwriting requirement many ask “when will we see proprietary reverse mortgages again?”. Good question. Presently our national lending limit remains at $625,500 through the end of this year thanks to HUD’s mortgagee letter in December 2012. Will HUD continue to extend this lending limit? Perhaps but unlikely. In the wake of a record 1.7 billion dollar bailout from the treasury and unrelenting scrutiny from lawmakers due to projected losses in FHA’s insurance fund, many may feel little sympathy for seniors with higher valued homes. In a risk-adverse and financially insecure political climate few will advocate for retirees they consider well-off. Additionally many industry leaders expect a return to a $417,000 national lending limit in 2014. Politics and budgets aside it comes down to the pivotal role of money. Mike McCully with New View Advisors said…
Get more reverse mortgage news, tools & technology at www.ReverseFocus.com.
