With the new HECM loan limits now official, originators have a great opportunity to reach out to borrowers who would benefit from refinancing their HECM.  Last week, Bob from MetLife sent out an email that gives a scenario of how the streamline refinance works for the HECM product.  

When a HECM borrower refinances, borrowers are potentially eligible to receive a credit on the MIP paid on the last HECM.  With this credit, the borrower will only pay MIP on the “new” value. 

EXAMPLE:
Assume a borrower with a $300,000 Max Claim who originally had a $200,000 Max Claim amount.

MIP on the new loan will be calculated as follows:
$300,000 X 2% = $6,000 – $4,000 original MIP = $2,000

Who is not eligible for the MIP Credit?
Borrowers are not eligible for the MIP credit if they are in default on the current HECM

For more information read Mortgagee Letter 2004-18 and to see the breakdown of the numbers click the link below.

Sample Refinance Scenario

Also, originators should expect lenders to scrutinize deals to make sure refinancing makes sense for the clients.