Changes that are being proposed to the home-equity conversion mortgage program include new consumer protections for borrowers and new lender requirements.
Since the
passage of the Housing and Economic Recovery Act of 2008 and the Reverse Mortgage Stabilization Act of 2013, several reforms have been implemented.
Among those reforms are limited initial withdrawals, protection for non-borrowing spouses and strengthened prohibition against misleading or deceptive advertising.
In addition, home-retention options have been expanded when property taxes and insurance premiums aren’t paid, while financial assessments are now being required to ensure borrowers have adequate income to cover things like routine property maintenance and property taxes.
Now the Department of Housing and Urban Development is proposing a new rule that reinforces those changes.
In addition, new consumer protections are being added
to ensure borrowers are sustained in their homes.
Among the changes being proposed is ensuring HECM counseling occurs prior to the signing of a mortgage contract.
The rule would limit lifetime interest rate increases on HECM adjustable-rate mortgages to 5 percent, while annual increases would be cut to 1 percent from the current 2 percent limit.
Under the proposal, mortgagees would be required to
pay Federal Housing Administration mortgage insurance premiums until the HECM is paid in full, the loan is foreclosed on, or a deed-in-lieu is executed. Currently, lenders are required to pay M.I. premiums until the mortgage contract is terminated.
The rule has utility payments included in the property charge assessment.
HUD is proposing to create a
“cash for keys” program to encourage borrowers to complete a deed in lieu so they can “gracefully exit the property versus enduring a lengthy foreclosure process.”
Lenders would be required under the rule to fully disclose all HECM loan features.
“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes where they’ve raised families and where they hope to live out their days,” HUD Principal Deputy Assistant Secretary for Housing Ed Golding said in a news release. “As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure, and sustainable financial option for future generations of senior homeowners.”
