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%
- This will encourage lenders to offer lower lender margins to achieve higher principal limits
- It will mean greater competition and flexibility
- Lower compounding rates on funds that were borrowed
- Lower growth on the line of credit
MIP (Mortgage Insurance Premium) – Changed initial MIP and annual MIP
- Initial MIP is 2% across the board for all claim amounts (this is an increase for some and a decrease for others)
- 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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