More HECMs available for home purchases under proposed changes

The Federal Housing Administration proposes changes to its Home Equity Conversion Mortgage Purchase Program This can expand its use.

According to data from the Ministry of Housing and Urban-Rural Development’s website, of the 2,980 approximate HECM endorsements issued in August, 192 were for purchase reasons; 319 were for refinancing, and 2,469 were for traditional planned use (taking out the HECM to live on). .

If the proposal passes during the rulemaking process, FHA would allow survivors to use additional funding sources to meet their monetary investment requirements to qualify to purchase HECMs.

“By expanding the list of allowable stakeholder contributions, FHA is more closely aligning its HECM stakeholder contribution policy with FHA’s forward mortgage loan program,” the agency said in a Federal Register filing.

Most of the current rules regarding HECM purchases come from Mortgagee letter issued in 2009 Some modifications were made in 2017.

Current rules allow borrowers to make three sources of contributions: cash on hand; cash from the sale or liquidation of the borrower’s assets; and HECM proceeds. If this provision is in effect, other permitted sources include premiums, gifts, disaster relief grants; and employer assistance.

The Notice of Rulemaking gives the following example: A home in Arizona sells for $491,974, the borrower’s closing costs are $20,300, and the maximum HECM benefit is $189,902.

“Under current policy, the total cash payment due by the borrower at closing is $322,372 ($491,974 plus $20,300 less $189,902),” the Federal Register states. “Under the proposed notice, interested parties could have up to Contributing 6% of the sales price of $29,518.44 to satisfy the borrower’s monetary needs, thereby reducing the total amount due from the borrower at closing from $322,372 to $292,853.56.”

These contributions can come from sellers, real estate agents, builders, developers, mortgage lenders or their third-party sponsors and “other parties interested in the transaction.” suggested.

“The 6% limit may apply to, but shall not exceed, the following fees: origination fee; other closing costs paid outside of closing, such as credit reports and appraisals; prepaid items; discount points; permanent and temporary interest rate purchases paid by interested parties; and payment of the initial mortgage insurance premium,” the FHA said.

The proposal has a 30-day comment period that expires on November 24.

Earlier this year, the Federal Housing Administration Simplify the claims process Applies to loans covered by the HECM program.

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