Starting this month, some major changes are coming to the HECM reverse mortgage industry as the government aims to strengthen the long run projections of the program. The Home Equity Conversion Mortgage (HECM) is Federal Housing Administration’s (FHA) reverse mortgage program which enables you to withdraw some of the equity in your home.
According to HUD Secretary Ben Carson, “We have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers. Furthermore, Carson noted that the changes are “needed and prudent steps to put the HECM program on a more sustainable footing so that it can remain a resource for senior borrowers.”
Here are the three major changes that have taken effect October 2017:
- Upfront HECM mortgage insurance premiums will be increased for certain borrowers, but lowered for others, as compared to the current system.
- The ongoing mortgage insurance premiums will be lowered, bringing down the total compounding rate cost for most borrowers. This could put rates more in line with the rates of traditional mortgages and the rates of home equity lines of credit.
- Principal limit factors will be changed, which impacts the amount of home equity that will be available for homeowners to access at various ages under the HECM program.
Click here to learn more about the specifics of each of these three major changes and how each one will affect borrowers.
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