FHA’s mortgagee letters articulate the policy changes intended to support the financial soundness of HECM program. In addition, FHA is providing approved lenders with a HECM Financial Assessment and Property Charge Guide which will help loan underwriters to implement the risk management reforms announced today which include:
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 twelve months following closing;
• Requiring a financial assessment for all HECM borrowers to ensure that they have the capacity and willingness to meet their financial obligations and the terms of the reverse mortgage; and
• Requiring borrowers to set aside a portion of the loan proceeds at closing (or withhold a portion of monthly loan disbursements) for the payment of property taxes and insurance based on the results of the Financial Assessment.
For more information, visit www.hud.gov.