The Federal Housing Administration is
reducing the risks associated with reverse mortgages, and I am staying abreast of the changes.
In recent years, FHA's Home Equity
Conversion Mortgage portfolio has changed in demographics and
borrower preferences that added significant risks to the Mutual
Mortgage Insurance Fund. These changes included borrowers shifting
from selecting adjustable rate mortgages with access to a line of
credit or modified tenure/term payment options to selecting
fixed-rate mortgages where the borrower draws down all available
funds at the time of closing. Younger borrowers with more debt and
stagnant home prices also have contributed to the risks.
FHA published two mortgagee letters
that note policy changes. They are intended to support financial
soundness of HECM program. The agency outlines changes to initial
mortgage insurance premiums and principal limit factors, restrictions
on the amount of funds senior borrowers may draw down at closing and
during the first year following closing, requirements for a financial
assessment for all HECM borrowers to ensure they have the capacity
and willingness to meet their financial obligations and the terms of
their reverse mortgages, and requirements that borrowers set aside a
portion of the loan proceeds at closing for the payment of property
taxes and insurance.
I am happy to answer
questions regarding the FHA changes to the reverse mortgage program.
The lender has thoroughly researched the changes and is ready to help
its customers understand the HECM program. I will
provide customers with expertise on which mortgage product is right
for each person.
According
to the FHA, an increasing number of tax and hazard insurance defaults
by those holding mortgages have heightened the need for a financial
assessment of a potential customer’s financial capacity and
willingness to comply with mortgage provisions.
Effective
Jan. 13, 2014, lenders must complete a financial assessment of all
prospective customers prior to approval and closing. The financial
assessment also is used to determine under what conditions the
prospective borrower meets FHA eligibility criteria.
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