Streamline Refinance Example For Reverse Mortgage Borrowers

image 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.

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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.  

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  • What about counseling for borrowers who are refinancing within 5 years of their last counseling session, and whose increased principal limit is more than 5 times the costs of the refinance transaction (including the service set-aside in costs), per the Anti-Churning Disclosure, and pursuant to ML 2004-18 (no fresh counseling required). Are investors prepared to follow ML 2004-18, or will they still require counseling, at an additional cost of up to $125 to borrowers? (By the way, shouldn’t HUD prohibit investors from increasing the costs and complexity of the HECM program?)

  • JB-Nutter- Hecm to Hecm Refinance

    I submitted a hecm to hecm refi to JB and its being denied because of the 5 to 1 ratio rule. I was under the impression that the 5 to 1 ratio was for the waiver of the counseling certificate. I spoke to my A.E with JB and was told for the time being its a JB Policy until JB gets more of a clarification of the Hecm to Hecm Guidelines. Is there anybody else having problems with submitting Hecm to Hecm Refi’s

  • Avoid delays by working with counselers willing to bill escrow at the close. Some borrowers are getting a discount if they pay with a credit card up front. Surprisingly many of my seniors would rather pay up front then finance the cost.

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