FHA Raises Annual Premiums Charged to Reverse Mortgage Borrowers

The Department of Housing and Urban Development announced new changes to the mortgage insurance premiums for the Federal Housing Administration’s reverse mortgage program on Wednesday.

For all Home Equity Conversion Mortgages (HECM) with a case number assigned on or after October 4th, 2010, FHA will raise the annual mortgage insurance premium (MIP) charged to borrowers from 0.5% to 1.25%.

The changes are necessary to ensure that ”FHA is in a better position to address the increased demands of the marketplace and return the Mutual Mortgage Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market,” said David H. Stevens Assistant Secretary for HUD.

Advertisement

The upfront MIP charged to HECM borrowers remains at 2.00%.

While not addressed in the mortgagee letter, HUD is expected to lower the principal limits for HECM program between 1% and 5% from where they currently stand in the coming weeks.  HUD told a group of industry leaders last week the changes would have less of an impact on younger borrowers, while older borrowers will see the biggest reduction in proceeds.

 

Join the Conversation (91)

see all

This is a professional community. Please use discretion when posting a comment.

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • At the NRMLA Policy Conference Colin Cushman of HUD explained why the proceeds are dropping for older seniors more drastically than younger. Since that time, Colin and I had a telephone where we discussed a related issue at some length.rnrnFirst let’s clear the slate of all of the speculation that went before. Second it would be great if others who attended that Conference would chime in. I am at work and do not have my notes from that Conference with me but here it goes.rnrnThe most basic issue is HUD has changed its assumptions in calculating Principal Limit Factors (u201cPLFsu201d) from assumptions based on reasonable theoretical assumptions to ones based on twenty years of experience. As they reviewed the differences, it became apparent that the PLFs for older seniors were too generous. A new factor was also added to the computation for deferred maintenance. What was discovered is that on HECMs which were outstanding for the same periods of time, older seniors generally had more deferred maintenance on their properties than younger seniors.rnrnLogically the answer Colin provided seems correct. Just looking at mortality in the last twenty plus years, life expectancy for older Americans has risen. rn rn

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • At the NRMLA Policy Conference Colin Cushman of HUD explained why the proceeds are dropping for older seniors more drastically than younger. Since that time, Colin and I had a telephone where we discussed a related issue at some length.rnrnFirst let’s clear the slate of all of the speculation that went before. Second it would be great if others who attended that Conference would chime in. I am at work and do not have my notes from that Conference with me but here it goes.rnrnThe most basic issue is HUD has changed its assumptions in calculating Principal Limit Factors (u201cPLFsu201d) from assumptions based on reasonable theoretical assumptions to ones based on twenty years of experience. As they reviewed the differences, it became apparent that the PLFs for older seniors were too generous. A new factor was also added to the computation for deferred maintenance. What was discovered is that on HECMs which were outstanding for the same periods of time, older seniors generally had more deferred maintenance on their properties than younger seniors.rnrnLogically the answer Colin provided seems correct. Just looking at mortality in the last twenty plus years, life expectancy for older Americans has risen. rn rn

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • At the NRMLA Policy Conference Colin Cushman of HUD explained why the proceeds are dropping for older seniors more drastically than younger. Since that time, Colin and I had a telephone where we discussed a related issue at some length.rnrnFirst let’s clear the slate of all of the speculation that went before. Second it would be great if others who attended that Conference would chime in. I am at work and do not have my notes from that Conference with me but here it goes.rnrnThe most basic issue is HUD has changed its assumptions in calculating Principal Limit Factors (u201cPLFsu201d) from assumptions based on reasonable theoretical assumptions to ones based on twenty years of experience. As they reviewed the differences, it became apparent that the PLFs for older seniors were too generous. A new factor was also added to the computation for deferred maintenance. What was discovered is that on HECMs which were outstanding for the same periods of time, older seniors generally had more deferred maintenance on their properties than younger seniors.rnrnLogically the answer Colin provided seems correct. Just looking at mortality in the last twenty plus years, life expectancy for older Americans has risen. rn rn

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • At the NRMLA Policy Conference Colin Cushman of HUD explained why the proceeds are dropping for older seniors more drastically than younger. Since that time, Colin and I had a telephone where we discussed a related issue at some length.rnrnFirst let’s clear the slate of all of the speculation that went before. Second it would be great if others who attended that Conference would chime in. I am at work and do not have my notes from that Conference with me but here it goes.rnrnThe most basic issue is HUD has changed its assumptions in calculating Principal Limit Factors (u201cPLFsu201d) from assumptions based on reasonable theoretical assumptions to ones based on twenty years of experience. As they reviewed the differences, it became apparent that the PLFs for older seniors were too generous. A new factor was also added to the computation for deferred maintenance. What was discovered is that on HECMs which were outstanding for the same periods of time, older seniors generally had more deferred maintenance on their properties than younger seniors.rnrnLogically the answer Colin provided seems correct. Just looking at mortality in the last twenty plus years, life expectancy for older Americans has risen. rn rn

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • While we have been awaiting the notification of this change since February 1, we now finally have it in print so that we can get some prospects off of the fence. rnrnWhile I agree with Admin about the 1% to 5% increase in reduction to PLFs coming also on October 4th (or October 1st), that is a minimum. It all depends how CBO (and perhaps OMB) rescore the program and then it all depends on the action of Congress, if a positive credit subsidy is still indicated.

  • Just one more example of the disparate treatment that personifies the Obama Administration. Roll out the red carpet for the “Liar Loan” borrowers with endless streams of money in foreclosure rescue schemes, yet at the same time when it comes to our seniors, they get bubkus.

  • Does anyone understand the logic behind older borrowers receiving the greater PLF reduction? Seems the greater ‘risk’ would accrue to the younger borrower with a longer potential period of occupancy…

  • I have wondered, with the yields continuing to increase on this product, if the lenders will be reducing their rates to compensate for this increase in monthly MIP. With many lenders offering a 4.99% rate, it’s almost a wash on the fixed rate product.

  • It might be assumed that older seniors would be expected to pass on sooner, possibly while the market is in its current depressed state, while younger borrowers might continue on until there is some recovery in real estate markets.

  • At the NRMLA Policy Conference Colin Cushman of HUD explained why the proceeds are dropping for older seniors more drastically than younger. Since that time, Colin and I had a telephone where we discussed a related issue at some length.rnrnFirst let’s clear the slate of all of the speculation that went before. Second it would be great if others who attended that Conference would chime in. I am at work and do not have my notes from that Conference with me but here it goes.rnrnThe most basic issue is HUD has changed its assumptions in calculating Principal Limit Factors (u201cPLFsu201d) from assumptions based on reasonable theoretical assumptions to ones based on twenty years of experience. As they reviewed the differences, it became apparent that the PLFs for older seniors were too generous. A new factor was also added to the computation for deferred maintenance. What was discovered is that on HECMs which were outstanding for the same periods of time, older seniors generally had more deferred maintenance on their properties than younger seniors.rnrnLogically the answer Colin provided seems correct. Just looking at mortality in the last twenty plus years, life expectancy for older Americans has risen. rn rn

string(109) "https://reversemortgagedaily.com/2010/09/01/fha-raises-annual-premiums-charged-to-reverse-mortgage-borrowers/"

Share your opinion