The Federal Housing Administration (FHA) recently announced a proposal for new rules to help strengthen its reverse mortgage program (Home Equity Conversion Mortgage) in order to make the program a more viable and sustainable resource for senior homeowners.
FHA has already implemented quite a few changes and consumer protections over the last two years. These new proposed rules such as capping rate increases, and better mortgage disclosures, will help even more of our nation’s senior homeowners.
Here is a list of the new proposed changes:
* Make certain that required HECM counseling occurs before a mortgage contract is signed;
* Require lenders to fully disclose all HECM loan features;
* Cap lifetime interest rate increases on HECM Adjustable Rate Mortgages (ARMs) to five percent.
* Reduce the cap on annual interest rate increases on HECM ARMs from two percent to one percent;
* Require lenders to pay mortgage insurance premiums until the HECM is paid in full, foreclosed on, or a Deed-in-Lieu (DIL) is executed rather than until when the mortgage contract is terminated;
* Include utility payments in the property charge assessment; and
* Create a “cash for keys” program to encourage borrowers to complete a DIL and gracefully exit the property versus enduring a lengthy foreclosure process.
Principal Deputy Assistant Secretary for Housing at the U.S. Department of Housing and Urban Development (HUD), Ed Golding had said this about the new proposals:
“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes where they’ve raised families and where they hope to live out their days. As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure, and sustainable financial option for future generations of senior homeowners.”