Despite Ginnie Mae’s recent ruling prohibiting lenders’ ability to securitize variations of fixed-rate Home Equity Conversion Mortgages (HECM), Reverse Mortgage Funding’s HECM Choice reverse mortgage looks like it’s here to stay, albeit with several changes.
Changes to RMF’s HECM Choice product include requirements for the minimum amount principal limit a borrower can draw at closing for the first year, as well as a minimum set aside to meet mandatory obligations, as defined by the Federal Housing Administration, according to a Lender Alert issued by RMF for correspondents and principal agents Friday.
The updated HECM Choice now requires a minimum draw of 60% of the initial principal limit and at least 50% in FHA-defined mandatory obligations and the balance taken under any of the HECM payment options, including tenure, term, modified tenure, modified term or line of credit.
RMF rolled out the HECM Choice in mid-December, billing it as offering the “best of both worlds” to borrowers. The loan offers borrowers to obtain a fixed-rate reverse mortgage that allows access to some of the proceeds upfront, and additional proceeds following the first year of loan closing.
The HECM Choice was just one of the myriad fixed-rate HECM variations springing up, with others like Live Well Financial offering other new products.
On April 1, Ginnie Mae issued its rule prohibiting the inclusion of fixed-rate HECM loans where borrowers can opt for a payment plan that allows future loan advances against the principal limit. The federal guaranteer also noted that HECM-backed securities issued on or after June 1, 2014 will not be allowed to include these types of loans.
As for the HECM Choice, RMF’s Lender Alert states that all loans in the pipeline that do not have mandatory obligations, as defined by FHA, of at least 50% must be submitted to the RMF Fulfillment Center by April 25 and be purchased no later than April 30, 2014.
The revised guidelines for the HECM Choice are effective for all loans that are purchased after April 30, 2014.
Written by Jason Oliva