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Overview
On September 1, 2010, we sent you a
Compliance ALERT [FHA's "HECM Saver" -
Uncorroborated (9/1/10)] about the uncorroborated reports
concerning HUD-FHA's new HECM Saver program. At the time, there was
no direct confirmation yet from HUD regarding the new HECM Saver:
no Press Release from HUD, no statement from HUD in the Federal
Register, and so forth - only, as of that writing, rumors and
hints. However, we continued to monitor this matter closely and
promised to provide the actual HUD-FHA issuance, including
guidelines, when and if the new HECM Saver is offered.
We now have corroboration in the form of Mortgagee Letter 2010-34
(9/21/10) of this second option in HUD-FHA's Home Equity Conversion
Mortgage (HECM) Program.
The new HECM Saver is
a second initial mortgage insurance premium (MIP) option, for the
purpose of lowering upfront loan closing costs, for mortgagors who
want to borrow a smaller amount than what would be available with a
"HECM Standard."
Effective: On or after
October 4, 2010, mortgagors may select either HECM Saver or
HECM Standard as an initial MIP.
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Highlights
Initial and Monthly
Premiums
- For HECM Saver, the initial MIP will be 0.01 percent (0.01% or
0.0001) of the maximum claim amount (MCA), and is collected at time
of loan closing. For HECM Standard, the amount of initial MIP will
continue to be 2 percent (2% or 0.02) of the maximum claim amount,
which also is collected at the time of loan closing.
- MIP for both HECM Saver and HECM Standard will be charged
monthly at an annual rate of 1.25 percent (1.25%) of the
outstanding loan balance.
Availability of HECM Saver and HECM Standard
HECM Saver and HECM Standard are
available for:
- all HECM transaction types (traditional, purchase and
refinance);
- all five payment plans (tenure, term, line of credit, modified
tenure and modified term);
- all interest rate indices (Constant Maturity Rate and London
Interbank Offered Rate);
- adjustable rate mortgages (monthly and annual); and
- fixed interest rate mortgages
Initial MIP
Calculation for Refinance Transactions
For all refinance transactions,
mortgagees and counselors must use the formula below to determine
the amount of initial MIP due for both HECM Saver and HECM
Standard.
Formula:
- New MCA multiplied by new initial MIP (%) = New MIP
- Old MCA multiplied by old initial MIP (%) = Old MIP
- Subtracting the result of (2) from the result of (1) yields the
MIP amount owed to HUD
Other Areas
Covered in Mortgagee Letter
- Principal Limit Factor Table
- FHA Connection Case Number Assignment Screen Changes
- Pipeline of HECMs
- Adaption of Legal Documents
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Visit
Library for Issuance
Home Equity Conversion Mortgage Program - Introducing HECM Saver;
Mortgage Insurance Premiums and Principal Limit Factor Changes for
HECM Standard, Mortgagee Letter 2010-34, September 21, 2010
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This communication is sent to our valued clients and colleagues,
who regularly receive our Advisory Bulletins, Mortgage Compliance Updates,
and Compliance
Alerts.
These publications are free to subscribers. Information contained
herein is not intended to be and is not a source of legal
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Reserved.
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