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% Rate Caps to Increase Costs: Secondary Market Concerns
If there’s one word that describes the recently announced proposed rule changes it’s digestion. As many professionals comb over the finer details, one can begin to see a clearer indication of the true impacts on our industry and most importantly, reverse mortgage borrowers.
First a correction. In the last episode, I regret to say that I incorrectly described the continuing payments of monthly insurance premiums as now being required to be sent to FHA monthly. That actually has been an established process for HECM lenders and servicers. What is different is that ongoing monthly premiums must be submitted even after the HECM has reached assignment status with HUD. Premium payments under the proposed rule must continue until the loan ultimately terminates.
Next, lower interest rate caps. There are two primary factors that will reduce the amount of available money to borrowers: home values and interest rates. However, another consequence of lowering adjustable rate HECM interest rate caps is the increase of interest rate margins. Lowering the interest rates caps on the adjustable rate loan would appear to benefit the consumer at first glance, but look again. While the lifetime cap will reduce volatility in FHA’s…
Download a transcript of this episode here.
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