WASHINGTON – June 7, 2016 – The Federal Housing Administration (FHA) proposed a new rule to strengthen its Home Equity Conversion Mortgage (HECM) Program – the official name for reverse mortgages.
In addition to formalizing some improvements announced earlier, FHA says its new proposed rule is intended to make certain FHA-insured reverse mortgages remain a sustainable resource for senior homeowners hoping to age in place. Read FHA’s proposed rule.
“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes,” said Ed Golding, Principal Deputy Assistant Secretary for Housing at the U.S. Department of Housing and Urban Development (HUD).
In the past two years, FHA implemented several reforms to improve its HECM Program. The proposed rule published last month, if approved, would:
- Make certain that required HECM counseling occurs before a mortgage contract is signed
- Require lenders to fully disclose all HECM loan features
- Cap lifetime interest rate increases on HECM Adjustable Rate Mortgages (ARMs) to 5 percent
- Reduce the cap on annual interest rate increases on HECM ARMs from 2 percent to 1 percent
- Require lenders to pay mortgage insurance premiums until the HECM is paid in full, foreclosed on, or a Deed-in-Lieu (DIL) is executed rather than when the mortgage contract is terminated
- Include utility payments in the property charge assessment
- Create a “cash for keys” program to encourage borrowers to complete a DIL and gracefully exit the property versus going through a lengthy foreclosure process
- Reprinted with permission Florida Realtors. All rights reserved.
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