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.
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.