Late last week the U.S. Department of Housing and Urban Development published Mortgagee Letter 2009-21 to clarify guidelines for borrowers who decide to refinancing existing HECM mortgages.
The ML officially implements a rule which was published last year that allows borrowers whose loans were assigned to HUD to refinance and qualify for a reduced mortgage insurance premium. The policy applies to all loans that were assigned on or after October 6, 2008.
Additional clarifications from the ML include:
The reduced initial MIP only applies when the property that serves as collateral for FHA insurance remains the same. Therefore, HECM mortgagors who terminate their HECM and purchase a new property using a HECM for Purchase transaction are not eligible for a reduction in the initial MIP on the new property.
HUD’s HUD-92901 “Home Equity Conversion Mortgage (HECM) Anti-Churning Disclosure” must be signed by the mortgagor and be included in the FHA case binder. This form ensures that the mortgagor is not being induced to refinance his/her existing HECM without benefit to the mortgagor and/or solely for the benefit of the mortgagee. Read the ML for more information regarding the “Anti-Churning Disclosure”.
The ML also clarifies that HECM refinance borrowers can waive and opt out of the HECM counseling requirement only if all three of the following conditions are met:
- The mortgagor has received the required HECM Anti-Churning Disclosure form;
- The increase in the mortgagor’s principal limit exceeds the total cost of the HECM refinance by an amount equal to five (5) times the cost of the transaction (Block #1 on Anti-Churning Disclosure Form); and
- The time between the closing on the existing HECM and the application for refinancing does not exceed five years.
To learn more about the the changes from ML 09-21 see the link below.