Important Announcement: HUD makes Reverse Mortgage HECM changes effective 10-2-2017

Here is what has changed:

PLF (‘Principal Limit Factor’, this is how they adjust for losses)- They lowered the floor rate from 5.06% to 3.00%

  1. This will encourage lenders to offer lower lender margins to achieve higher principal limits
  2. It will mean greater competition and flexibility
  3. Lower compounding rates on funds that were borrowed
  4. Lower growth on the line of credit

MIP (Mortgage Insurance Premium) – Changed initial MIP and annual MIP

  1. Initial MIP is 2% across the board for all claim amounts (this is an increase for some and a decrease for others)
  2. Annual MIP decreases from 1.25% to .50% annually.


Why did HUD make these changes?

They needed to make changes to adjust for losses, pay for losses and maximize the funds available for the borrower.

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