The reverse mortgage industry and the Department of Housing and Urban Development are beginning to shed light on the changes that are in store for the Home Equity Conversion Mortgage program following approval for program change granted by Congress this month.
HUD Deputy Assistant Secretary Charles Coulter explained the proposed changes, without providing full details which are still being worked on at HUD, in a recent conference call with the National Reverse Mortgage Lenders Association’s executive and policy committees.
HUD is planning to create a new reverse mortgage loan program, while discontinuing the two programs—the Standard and Saver—as they are currently offered, according those familiar with the details. The new loan will come with new principal limit factors that range somewhere between the current Saver and Standard programs, though details have not yet been released on exactly where on the scale the new PLFs will fall.
Officials have stated to Congress and the public that the desired changes will shore up the FHA’s insurance fund for its HECM program and will also make the products safer and more sustainable for borrowers.
While additional program changes have been discussed, including a financial assessment of borrowers and a set aside for property tax and insurance payments, those changes are not expected to come in the first set of product changes, rather they are expected to be released in the coming months.
The new product will come with new mortgage insurance premiums that are dependent upon the amount that is drawn upfront and whether that amount falls under or exceeds a 60% threshold. Only borrowers with mandatory obligations will be able to exceed that threshold.
Details are expected from HUD some time before September 1. The agency has stated it would like to implement the changes before October 1, 2013.
Written by Elizabeth Ecker