Housing Bill Affects HECMs, Too
Get in the know about changes to the Federal Housing Administration’s reverse-mortgage program
By Philip E. Lipp, president, Allwest Mortgage
The Housing and Economic
Recovery Act of 2008 affects
the mortgage industry in many
ways. In its Federal Housing Administration (FHA) Modernization Act, changes
are set forth for the FHA’s Home Equity
Conversion Mortgage (HECM). The act
includes improvements, protections and
changes that will affect reverse-mortgage
borrowers and originators.
At press time, the U.S. Department of
Housing and Urban Development (HUD)
has not issued mortgagee letters to announce implementation dates for all the
changes (current info: tinyurl.com/hud
mltr). Based on the bill’s provisions, however, here is a glimpse of what mortgage
originators should know.
First, along with the conventional- and
FHA-loan-limit increases, the housing bill
increases lending limits for HECMs. The
new national loan limit is $417,000. As
of press time, the FHA targeted a Nov. 1
implementation date.
With increased lending limits, eligible borrowers (ages 62 and older) with
higher home values could access more
money. This is especially good news,
considering there has been less money
available for jumbo, proprietary reverse-mortgage products.
Another change affects reverse-mortgage costs. Industry partners, including
Desktop Originator.
The power you need.
© 2008, Fannie Mae. All rights reserved.
Desktop Originator® is a flexible business solution that helps you identify the best mortgage options all in
one place. With fast underwriting recommendations at point of sale, Preliminary Findings results before
selecting a lender, and up to five loan product recommendations and comparisons with only one submission,
you'll get the power you need to build your business. Get Desktop Originator now at Power YouNeed.com.
Fannie Mae is proud to be a sponsor of NAMB West 2008.
Come visit us at Booth 609.
AARP and the National Reverse Mortgage
Lenders Association, worked out a compromise to lower origination fees, which
is now part of the new rules.
The previous rules allowed as much as
2 percent of the lending limit as an origination fee. For example, if the lending limit
was $362,790, the origination fee could be
as much as $7,255.80.
The new rules have a formula of 2 percent of the first $200,000 of the lower of
the new lending limit or the home value,
then 1 percent on amounts more than
$200,000. The maximum origination fee
is capped at $6,000.
Other important changes to the HECM
program include:
■■ HECMs for home purchases: Previously,
reverse mortgages could only be used as refinance loans. The housing bill now allows
HECMs for principal-residence purchases.
■■ HECMs for co-ops: The act adds co-ops
to allowable property types for HECMs.
■■ Easing of rules for manufactured
homes in condo developments and overhaul of rules for condo-development approval process.
There also are changes in how reverse
mortgages are marketed. Previously, a non-FHA-approved broker or lender could receive a portion of the origination fees as
an adviser. They were paid in exchange for
assisting an FHA-approved reverse-mortgage company and educating a potential
reverse-mortgage borrower. Effective this
past Oct. 1, the HECM-adviser program
is prohibited.
If you were working as an adviser, you
now must either become FHA-approved or
work for a FHA-approved company.
Finally, there is an important safeguard
issue of which mortgage originators must
be aware concerning cross-selling financial
products. Congress and HUD have become
aware of financial abuse in the sale of inappropriate annuities and financial instruments that were not in the best interests of
borrowers. Based on the housing bill’s language and to remedy this situation, HUD
will develop rules and regulations to curb
the use of reverse mortgages as a facilitating agent for abuse.
If you want to be a reverse-mortgage
originator, it is critical that you stay on top
of these changes. Get involved with industry organizations and align yourself with
companies that do things right.
DESKTOP ORIGINATOR
the
power
you need™
Philip E. Lipp is president
of Allwest Mortgage in Los
Angeles and has been in
the mortgage business
with his wife, Ilene, for 25
years. He participated in
the Los Angeles Mayor’s
Office’s Predatory Lending Initiative to inform
seniors. He also is a founding director and
past president of the California Association of
Mortgage Brokers. For questions about reverse
mortgages, call (818) 752-0999 or e-mail
phil@allwestmortgage.org.
