HUD’s HECM Final Rules go into effect tomorrow (9/19/2017) and include in part:
- For fixed rate HECMs, only a full-funded LESA may be used.
- Partially funded LESA’s will distribute LESA funds two times a year to the borrower for the payment of property charges. Fully funded LESAs will directly pay the insurance or taxing authority, not the borrower.
- Initial distribution limits will remain in effect for the first 12 months, but cannot be reduced below a 50% distribution cap without additional rulemaking.
- Sellers are allowed to pay fees required to be paid by the seller under local or state laws, including the purchase of a home warranty policy.
- The seasoning of non-HECM liens looks at the 12 month period prior to the HECM closing.
- HELOCs (home equity lines of credit) are excluded from the 12-month seasoning requirement but are subject to first-year distribution limits.
- All HECM products and features must be disclosed to the borrower in a manner that is acceptable to the FHA Commissioner, regardless of the products offered by the particular HECM lender.
- Borrowers may lock in their Expected Interest Rate (EIR) prior to the date of loan closing or lock in their rate on the day of closing.
- The payoff of unsecured debts not secured by the property as defined by the Commissioner is a mandatory obligation.
GET FULL OFFICIAL TEXT OF FINAL HECM RULES HERE
John Lunde is the president and founder of Reverse Market Insight (RMI). They closely track the reverse mortgage (HECM) industry data points and trends.
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