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Recent changes to HECM program and how it may affect you (the post Oct 3rd reverse mortgage world)

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2022 Changes to HECM Reverse Mortgage

When it comes to reverse mortgages, one thing for certain is change.. It’s understandable that a unique and fairly new program such as the HECM reverse mortgage will encounter changes as it plays out for real people and the programs insurer, HUD. The first change to note is in the Initial Mortgage Insurance Premium (IMIP) and the Annual or Ongoing Premium.  The IMIP is now 2% of the home value up to the maximum claim amount of $970,800 for all borrowers, whether your full draw amount is 60% of the principal limit or not. This is a savings for those who had high draws and a cost increase for those with draws below 60%.  The ongoing mortgage insurance premium as dropped from 1.25% to .5% on the loan balance.  This is a very large drop in overall costs for those who carry high mortgage balances and puts the full accrual rate competitive with conventional and other FHA loans.

A very interesting change that potentially affects borrowers is twofold.  HUD lowered the 5.06% floor to 3% so now it’s more important than ever to get multiple quotes as the margin quoted directly impacts the amount you receive.  Lower margins and rates result in larger principal limits or funds to the borrower.  The second and very important change is that HUD has also lowered the Principal Limit Factors, which is the percentage of the value of the home that homeowner’s will receive, but that might be offset by the lower floor on the rate depending on your situation.  Please feel free to give me a call so I can explain how it impacts you as every borrower situation is unique.

Scott O’Connell