Articles in Category: Reverse Mortgage or HECM

February 13, 2013

FHA HECM Loan Changes: When and How

On January 30, FHA issued guidance about pending changes to the FHA Home Equity Conversion Mortgage or HECM loan program. The changes affect all FHA HECM loans for fixed rate mortgages with case numbers assigned on or April 1, 2013. According to the FHA official site, “To help sustain the HECM program as a viable financial resource for aging homeowners and to strengthen the Mutual Mortgage Insurance Fund, the HECM Saver will be the only initial MIP option available to mortgagors who seek the predictability of a fixed interest rate mortgage and lower upfront closing costs.” This, according to FHA Mortgagee Letter 2013-01, requires the lender to “designate HECM Saver as the initial MIP and use the HECM Saver principal limit factors to determine the amount of funds available to | more...

February 6, 2013

FHA Loan Rule Changes

By Joe Wallace

The FHA has issued several rule changes recently including alterations to the FHA HECM and HECM Saver programs, new guidelines for mortgage insurance, and also the procedures for how some FHA loan applications must be processed with credit scores and debt-to-income ratios that exceed certain new guidelines. For example, FHA refinance loans for borrowers with negative equity in their homes have new guidelines which state, “Refinances of Borrowers in Negative Equity Position where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually underwritten.” The same is true in cases of FHA Energy Efficient Mortgages. New FHA rules state, “While Energy Efficient Mortgages where the borrower has a decision credit score below 620 and the debt-to-income ratio exceeds 43.00% must be manually | more...

February 5, 2013

FHA Announces Changes To HECM Loan Program

By Joe Wallace

The FHA has issued a press release and Mortgagee Letter describing changes to the FHA Home Equity Conversion Mortgage (HECM) program. According to the FHA official site, the FHA will merge certain options associated with the HECM program and the FHA HECM Saver program as described below: “…FHA will consolidate its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options. This change will be effective for FHA case numbers assigned on or after April 1, 2013. The Fixed Rate Standard HECM pricing option currently represents a large majority of the loans insured through FHA’s HECM program and is responsible for placing significant stress on the MMI Fund.” The FHA press release adds, “To help sustain the program as a viable financial resource for aging homeowners, | more...

October 17, 2012

FHA Warns About Home Equity Mortgage Loan Scams

By Joe Wallace

The FHA official site includes a page about reverse mortgages and Home Equity Conversion Mortgages. On that page, you’ll find a warning from the FHA and HUD about scam artists who take advantage of some loan applicants who don’t know enough about the FHA’s free information on HECM loans and reverse mortgage loans. “Reverse mortgages are becoming popular in America” the FHA site says, “Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more. If you are interested in a reverse mortgage, beware of scam artists that charge thousands of dollars for information that is free from HUD!” | more...

October 3, 2012

Things You Should Know About FHA Refinance Loans: The Basic Details

By Joe Wallace

Refinancing an FHA mortgage is similar to refinance loan on other types of mortgages such as conventional loans or VA loans. Naturally the FHA has its own list of requirements and regulations that govern refinance loans; do you know the basics as well as you should? If you’re considering an application for an FHA refinance, here are a few general things you should know about going into the process. In the FHA loan rulebook under the section, “Purpose of a Refinance Transaction” we learn, ” A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage; –for borrower(s) with legal title, and –on the same property”. The rules also state that an FHA borrower is “eligible to refinance the loan, as | more...

April 16, 2012

FHA Reverse Mortgages, Scams, and Required HECM Loan Counseling

By Joe Wallace

There’s a special type of FHA home loan called the Reverse Mortgage, also known as a Home Equity Conversion Mortgage or FHA HECM loan for short. From the FHA official site, “If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may participate in FHA’s Home Equity Conversion Mortgage (HECM) program.”

September 1, 2011

FHA Updates Rules for HECM Loan Counseling

By Joe Wallace

FHA Home Equity Conversion Mortgages, also known as HECM loans, are for qualified borrowers 62 or older who want to apply for a loan on their home using the equity in the home to secure the mortgage. This type of loan features cash out to the borrower and is not paid back until the borrower dies or sells the property. FHA HECM loans are unique because they offer money to the borrower as a monthly installment, a line of credit or other arrangements as permitted by FHA rules. The FHA requires applicants to get HECM-specific loan counseling before they can commit to the mortgage due to the terms and conditions of the mortgage loan. Some of those terms and conditions require the borrower to meet all loan obligations (including staying | more...

August 24, 2011

FHA Condo Loans and Conversion Projects

By Joe Wallace

FHA loans aren’t just for typical suburban homes–borrowers can apply for an FHA insured mortgage on many different types of properties, including condominium projects. It would be easy to assume that FHA loans are only for existing condo projects since FHA guidelines state all condo loans may be issued only on FHA-approved condos. But FHA loans may also be issued for condo conversion projects if they are approved and meet FHA requirements. One of the first hurdles for a condo conversion project to clear in order to be considered for an FHA insured condo loan is the definition of “conversion”. According to FHA rules, “Conversion to a condominium regime occurs in those projects which involve

July 26, 2011

Can FHA HECM Loans Become Delinquent?

By Joe Wallace

In troubled economic times, FHA borrowers can get into trouble on their mortgages because of reduced income, higher prices and other issues. FHA and conventional borrowers know that missing one payment isn’t necessarily the road to foreclosure, but such problems should be addressed quickly to avoid going into loan default and/or foreclosure proceedings. Those with Home Equity Conversion Mortgages wouldn’t seem to be affected in the same way, since a HECM loan is designed to give the borrower access to funds supplied using the equity in the property as the security for the loan. There are no monthly payments and the loan is satisfied once the borrower dies or sells the home–once the home is sold, the loan is paid off in full, So how is it possible that an | more...

July 19, 2011

FHA HECM Loan Interest Rate Lock-Ins

By Joe Wallace

One frequently asked question about FHA Home Equity Conversion Mortgages has to do with the interest rate on the loan. Can the borrower get an interest rate lock-in on an FHA HECM? On HECM loans, the borrower’s principal loan limit could be affected if interest rates change between the time the loan is applied for and the time the loan closes. Do FHA rules allow a lender to fix the interest rate on these mortgages? According to the FHA official site, HECM loans are permitted to feature an interest rate lock-in at the time the loan application is submitted. “FHA will allow for mortgage lenders to set the expected interest rate for HECMs at the time the loan application is signed by the borrower rather than on the date of | more...