HUD Permits Applications For New Reverse Mortgage Loan Limit

October 10th, 2008 | by admin Published in FHA, NRMLA, News, Reverse Mortgage | 6 Comments

In response to the email NRMLA sent out the other day regarding the forthcoming implementation of the new HECM loan limits, they received a number of questions and forwarded them to HUD. The following four bullet points are “verbatim” answers NRMLA received from Meg Burns in an email message that she sent out to the various trade associations interested in this topic:

The new mortgagee letters will be issued as quickly as possible. We are trying for a date no later than November 1, but cannot guarantee that date.
In the interim, we will permit lenders to begin to take apps that reflect the new $417,000 loan limit, but lenders must also use the new origination fee calculation for these loans. These loans may not and cannot be insured until the ML comes out announcing the new limits.
Loans for which you have already taken apps, but not yet closed, can be reworked; all final docs must reflect new max claim and principal limit. The new origination fee calculation must be used for these deals as well. And, again, these transactions cannot be insured prior to issuance of the mortgagee letter.
Finally, new loans, for which apps are taken after the issuance of the ML must be in accordance with the new loan limit and new origination fee calculation (of course)

NRMLA will be reaching out to Meg later today, so if you have questions please forward them along to Liz or Peter and they will be sure to bring them to HUDs attention.

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Robert Fierro

Does this mean we can take apps now for purchases for targeted November/December closings ?

Rick May

what will MIP be?? will it be 2% of the new claim amount?

stanley goldwasser

Can you ask Meg when she thinks we will hear about the purchase with the HECM?

Bill Peters

Rick,

MIP will continue to be 2% at closing and 1/2% annually.

The discussions about reducing MIP evaporated quickly as FHA saw home values dropping. They feared that falling home values could increase the claims size and claims rate on the mortgage insurance fund. Until then, the program had seemed to be over-funded. I doubt they will entertain any reductions in MIP until we've worked our way through this mess several years down the road.

Question_Mark

Mrs. Burns' four responses are interesting but are inconsistent with prior information including the information issued during the July 31 joint NRMLA/HUD telephone conference call. HUD would help all of us by quickly releasing the Mortgagee Letters specifically dealing with the HERA lending limit and origination fee structure.

Is anyone aware of an update on the scheduled release date of the Mortgagee Letter(s) on HECMs for purchase? Has anyone heard if HUD will use a seasoning test to define the difference between a HECM refi and a HECM for purchase?

Mark Draper

I know we are all waiting for the lending limts letter, what about the coop provision, will the come out Nov 1st?

Admin

Mark, I've yet to hear about any of the other provisions

Question_Mark

Mark,

Admin is right.

On July 31, 2008, Mrs. Burns was excited to announce that HUD would have an initial Mortgagee Letter out by October 1, 2008, about the expansion of HECMs to more manufactured homes with a follow up Mortgagee Letter further expanding the program out by the end of the year. There has been no update on the issuance of either of these MLs.

In the last few weeks, Mrs. Burns announced at a MBA teleconference education session that the Mortgagee Letter on Cross Selling will be delayed until March 2009. In the July 31, 2008 meeting she predicted the date would be sometime in February 2009.

We are nearing the end of the Bush Administration. Several key officials at HUD serve at the pleasure of President Bush. At the end of most Presidential administrations either the regulatory process gets more active or comes to a standstill.

With the financial markets needing more attention, there are real questions as to whether HUD/FHA can afford the attention needed to issue the Mortgagee Letters our industry needs and craves. Hold on tight because some items may have to wait until early next spring.

This author (me) was wrong on how soon HUD/FHA would announce its very unpopular decision (except to the executives at some of the major lenders) on the HERA lending limit of $417,000 . Hopefully, this line of reasoning is wrong once again.

HUD Permits Applications For New Reverse Mortgage Loan Limit

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