HUD to Combine Existing Reverse Mortgage Products

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

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  • This is an interesting turn of events.

    Since the Secretary is using his authority to change the program so dramatically, two questions come to mind. The first is whether or not the program will only have one type of interest rate (adjustable) product left and the second is whether or not HUD will use its new power to create a hybrid HECM?

  • A moving scale on mortgage insurance premiums based on loan amount or appraised value is a reasonable solution. However, it shouldn’t be used as or perceived as a penalty for drawing cash upfront.

    • Mr. Rodriguez,

      If anything the highest rate should be preserved for those who need more than 60% or more of the available funds at funding. These are exactly the HECMs which are wreaking havoc on the MMI Fund. HUD should also consider to raise premiums by MSA property location. That is a normal and accepted insurance practice across the country, i.e., premiums reflect objectively measurable risk by large population bases.

    • The amount of cash drawn up front has likely been determined by FHA to be an indication of risk of under-collateralization. Higher risk loan = higher insurance premiums.

  • This is a whole different loan program. At first it appears to be a lowering of Standards and an elimination of Savers but add that to the new cap and upfront MIP rules and you are looking at a whole different beast. Yet HUD has more rules to implement after this change.

    This is a whole different product.

  • Anyone doing reverse mortgages in the state of Massachusetts should be aware the Division of Banks will not allow a new product until approved through the lender offering it. If all existing products are eliminated then there will be no business in MA for the foreseeable future. I remember the Saver took a few months to get approved.

  • I have no clue about the nbs. It makes absolutely no sense to how the loan works. The logic is not there but we are dealing with the government aren’t we.

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