FHA Reform Act Provides Ability to Modify HECM Insurance Premiums

Last week the House of Representatives passed H.R. 5072, the FHA Reform Act of 2010. The bill would almost triple the cap on annual premiums that the FHA can charge borrowers for mortgage insurance, raising the cap on annual premiums to 1.50% from 0.55%.

The bill also provides the US Department of Housing and Urban Development the ability to adjust the HECM program’s upfront MIP said a spokesperson from the agency.  “We are currently analyzing multiple different options to minimize impact to borrowers while managing the financial health of the HECM program,” he said.

The National Reverse Mortgage Lenders Association is working with FHA and Senate staff to ensure that when a Senate version of the bill is drafted, it states more explicitly that any efforts undertaken to modify insurance premiums will apply to all FHA mortgages, including HECMs.  “Thus providing the industry and FHA the added flexibility to re-engineer the HECM product, so that it can sustain itself without a credit subsidy,” said NRMLA.

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During the NRMLA Policy Conference, HUD Director of Portfolio Analysis, Colin Cushman, spoke about two new reverse mortgage product options that the agency hopes to enact by the end of the fiscal year. Both products have 1.25% annual MIPs, a change that the FHA Reform Act of 2010 could help to facilitate. More information on these two new products can be found here.

Immediately after H.R. 5072 passed the House, the bill was received by the Senate, read twice, and referred to the Committee on Banking, Housing, and Urban Affairs. 

Written by Reva Minkoff

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  • As to the future of the HECM program, it is important that HUD/FHA have the authority to change the MIP to restructure the product as needed. Unfortunately this flexibility is absolutely necessary because of the switch of the HECM program from the General Insurance Fund category to the Mutual Mortgage Insurance category coupled with the depressed home appreciation rates used in the positive/negative credit subsidy calculation by OMB.

  • As to the future of the HECM program, it is important that HUD/FHA have the authority to change the MIP to restructure the product as needed. Unfortunately this flexibility is absolutely necessary because of the switch of the HECM program from the General Insurance Fund category to the Mutual Mortgage Insurance category coupled with the depressed home appreciation rates used in the positive/negative credit subsidy calculation by OMB.

  • As to the future of the HECM program, it is important that HUD/FHA have the authority to change the MIP to restructure the product as needed. Unfortunately this flexibility is absolutely necessary because of the switch of the HECM program from the General Insurance Fund category to the Mutual Mortgage Insurance category coupled with the depressed home appreciation rates used in the positive/negative credit subsidy calculation by OMB.

  • As to the future of the HECM program, it is important that HUD/FHA have the authority to change the MIP to restructure the product as needed. Unfortunately this flexibility is absolutely necessary because of the switch of the HECM program from the General Insurance Fund category to the Mutual Mortgage Insurance category coupled with the depressed home appreciation rates used in the positive/negative credit subsidy calculation by OMB.

  • As to the future of the HECM program, it is important that HUD/FHA have the authority to change the MIP to restructure the product as needed. Unfortunately this flexibility is absolutely necessary because of the switch of the HECM program from the General Insurance Fund category to the Mutual Mortgage Insurance category coupled with the depressed home appreciation rates used in the positive/negative credit subsidy calculation by OMB.

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