principal limit factors

Big Changes for Reverse Loans

As HUD promised, there are huge changes taking place September 30th, 2013  to the FHA insured loan program.   The reason for this is due to the findings that the pool of insurance that guarantees that these loans will pay off in the future, is in the “red”.   It as been determined that the best course of action to protect the unique loan’s viability into the future,  is to make some drastic changes to it at this time.

Some of the immediate changes will occur on the 30th. with additional changes and or requirements occurring in January 2014.

Following is an article that discusses the situation.

HUD Slashes Reverse Mortgage Principal Limit Factors

Posted By Elizabeth Ecker On September 4, 2013 @ 2:21 pm In FHA,News,Reverse Mortgage | 12 Comments

“Following the announcement of changes [1] to the Federal Housing Administration’s Home Equity Conversion Mortgage program, the Department of Housing and Urban Development today announced new reverse mortgage principal limit factors [2] to go into effect October 1, 2013.

The new tables have been posted by HUD [2] to reflect a roughly 8% cut in PLFs, according to industry estimates. Compared with 2011 Standard factors, according to estimates from Ibis Software, the reduction is around 15%.

HUD issued two mortgagee letters this week specifying program changes including a shift to one new set of principal limit factors that consolidates the HECM Standard and HECM Saver programs also effective October 1. Borrowers will also be limited in the amount of loan proceeds that can be disbursed at closing or during the initial one-year period after loan closing.

Additional changes will include a financial assessment of borrowers and set-asides for taxes and insurance payments. Those changes will go into effect January 2014.

“The changes being announced [this week] will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program,” Federal Housing Commissioner Carol Galante said in announcing the changes. “Our goal here is to make certain our reverse mortgage program is a financially sustainable option for seniors that will allow them to age in place in their own homes.”
Written by Elizabeth Ecker [4]


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