Fannie Mae Changes Pricing Policy For Reverse Mortgage Refis

image Generation Mortgage recently published an alert stating that Fannie Mae announced a modification to their pricing policy for HECMs.  Effective immediately, all HECM to HECM refinances are eligible to earn a premium, but lenders are still obligated to comply with all HUD regulations for HECM refinances.  

Prior to this change, most lenders weren’t paying premiums for any HECM to HECM refinances that did not pass the 5:1 Anti-Churning test.  For HECM refinances, HUD requires that lenders provide borrowers with its Anti Churning disclosure which is designed to: 

prevent “churning,” an irresponsible lending practice whereby lenders engage in multiple refinancing to generate additional profit from loan fees and charges. The “churned” mortgages are not made in the interest of the borrower and provide no financial benefit to the borrower.

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Anti Churning Disclosure 

The alert from Generation does state its underwriters will continue to ask for detailed information from originators and borrowers should the anti churning ratio (5:1 Rule) not meet the rule as established by FHA.

At the end of the day, it sounds like Fannie Mae is letting HUD handle the task of holding lenders accountable.  Financial Freedom made the same announcement earlier this week as well.  I’d expect other lenders to follow suit.

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  • I write to inquire about Reverse Mortgages for cooperatives in NYC. I know they were allowable until the financial downfall in 2008.
    I understand the FHA is submitting new guidelines for the issuance of cooperative reverse mortgages. I was under the impression that the this would be forthcoming in January 2009. What happened? I am still trying to secure reverse mortgage on my co-op in NYC.
    Thank you for your prompt response.

    Fredie

  • My aunt is in the same position as Mr. Crutchfield. Is there any further news about the FHA’s progress on the necessary guidelines for getting reverse mortgages on coops? Are there any non-HECM products that are still available for coops?

  • Many thanks to The Critic for the prompt response. My elderly aunt has a lovely two bedroom coop apartment in a luxury building in the most fashionable part of Manhattan, but has exhausted her retirement resources even though she has always lived modestly. Like many people in her generation, she is fiercely independent, with the result that she wishes to continue to live in her own home but is totally resistant to the idea of accepting my help to meet the expenses of daily life. I have left contact information with several lenders so that they can get in touch as soon as HUD issues a Mortgagee Letter for coops, but there is really no time to be lost, both for my aunt and for many other seniors. I wish there were some way of speeding HUD up.

  • I have heard from several lenders that the mortgagee letter for co-ops would be out by August, it is now September and no one seems to know what is holding it up. I live in CA in a senior development of 6,000 co-ops and many of us desperately need to obtain a reverse mortgage to keep us in our homes. Is there any information from HUD as to when the mortgagee letter will be out?

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