At the end of March HUD issued Mortgagee Letter 2008-8 to provide guidance to lenders who are offering the HECM fixed product. There was confusion on the product which lead to most lenders requiring 100% of funds to be withdrawn at closing. Some lenders would allow a line of credit but the rate was around 16% if I remember correctly. Here is what the new mortgagee letter says:
- Fixed interest rate HECMs may be open or closed-ended credit;
- The expected average mortgage interest rate used to calculate the principal limit on a fixed interest rate HECM and the HECM Note rate must be identical;
- The monthly servicing fee for a fixed interest rate HECM can be up to $30.00; and
- HECM borrowers can change payment plan options during the term of the mortgage as long as the mortgage balance is less than the principal limit.
I haven’t seen any announcements from lenders regarding changes in their HECM fixed programs but I wouldn’t be surprised if we see something next week.Mortgagee Letter 2008-8