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New HECM Rules

By Gerry W. Beyer

Hecm

The Housing and Urban Development department recently released new rules concerning home equity conversion mortgages (HECM), which will make HECMs a significantly less attractive way for retirees to ensure they have access to cash.

Key changes are:

  • Reduced flexibility.  HECMs will now come in a single version with a sliding fee scale.  The “saver” version has been eliminated.

  • Fee increase.  The mortgage insurance premium has increased to 2.5% (up from 2%) of the appraised value for larger loans and 0.5% (up from 0.1%) for loans below 60% of appraised value.

  • Smaller loans and draws.  For larger loans, the maximum loan amounts have been reduced by 15%, and borrowers can only access 40% of that during the first year.

  • Risk assessment.  Borrowers will have to undergo a mandatory credit assessment, which could result in a set-aside of proceeds or even outright denial.

See New HUD Rules Make Reverse Mortgages Less Attractive, Wealth Strategies Journal, Dec. 19, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Posted in:
Estate Planning - Generally