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News & Press: Industry News

Reverse Mortgage Rules Change

Monday, September 18, 2017  
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The Department of Housing and Urban Development (HUD) announced new rules for government-backed reverse mortgages that adjust premiums and impose new lending limits (draws). The program, known officially as the Home Equity Conversion Mortgage (HECM) Program, will be subject to the new rules beginning on October 2, 2017. Existing reverse mortgage loan borrowers will not be effected. The program has faced rising defaults and estimated losses exceeding $7 billion.

HUD issued a fact sheet along with the announcement that claims that without the action, the Federal Housing Administration (FHA) would need funding from Congress for any loans in the new fiscal year that starts on Oct. 1, 2017.

Beginning Oct. 2, the initial mortgage insurance premiums for new HECM borrowers will increase from the current 0.5% that is available to some borrowers to 2.0% of the maximum loan amount for all borrowers. Prior to this change, homeowners using less than 60% of their available equity in the first year of the reverse mortgage loan paid an up-front premium of just 0.5%. Those who borrowed more than 60% of the available loan limit during the first year of the loan paid an up-front mortgage insurance premium of 2.5%. In addition, HECM's annual MIP will now be 0.5% of the outstanding mortgage balance, reduced from the prior schedule of 1.25% for all borrowers. Finally, the new rules reduce the amount of money seniors can borrow.


California Land Title Association


1215 K Street #1816 Sacramento, CA 95814-3905
Email: mail@clta.org  |  Phone: 916-444-2647  |   Fax: 916-444-2851