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Justin Fitzhugh

FHAs Reverse Mortgage New Principal Limit Factors

Saturday, August 16, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation - Message

FHA issued new Principal Limit Factors (PLFs) for Home Equity Conversion Mortgages (Reverse Mortgages). Mortgagees must ensure that borrowers are given cost / benefit analysis of HECM loans. The intention behind this requirement is to help the borrower asses whether the HECM insured mortgage will his/her needs.[1]

Mortgagees must advise prospective borrowers and their non-borrowing spouses to discuss with their housing counselor whether principal limit factors, PLF, below 20% improve their financial situation.

The new factor tables have been revised and now include limit factors for borrowers with a non-borrowing spouse younger than 62. Here you can find a download link to view PLFs effective as of August 4th, 2014: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhomelenders

These limits are part of a strategy to transform the HECM into a sustainable program. Recently, the FHA limited the insurability of fixed and adjustable interest rate HECMS.[2]

The FHA limited insurability of Fixed Interest Rate HECMs to loans in which the borrower is limited to a single, full draw at the time of closing with no future draws. The agency limited insurability on Adjustable Interest Rate HECMs to those in which the payment plan options are either tenure, term, line of credit, modified tenure, or modified term, and all of these without single disbursement lump sum payment option.

Given the overhaul of the HECM program, HUD anticipated an increase in demand for counseling, and the agency prepared a host of resources for housing counselors.[3] NeighborhoodWorks america redesigned the HECM Counselor Resources website which incorporates content and resources for HUD HECM Counselors and consumers: http://www.hecmcounselors.org

Through this website, housing counselors get:

  • access to forums to discuss topics and best practices
  • access to the Expert tool
  • search for for colleagues with specific language skills
  • access continued education and HECM exam requirements
  • read about HECMs training offering

HECM Consumer get links to Federal Resources about HECM information, HECM Counseling Location, and other senior resources.

Remember a couple of months ago HUD issued specifications on how NOT to advertize HECM products.[4] The HECM program is at risk, and the agency has had to overhaul the program. The program is intended to help elderly homeowners with their financial needs and since most of all will be old sooner or later, I suggest we do our best to comply with these guides.

1) http://portal.hud.gov/hudportal/documents/huddoc?id=14-12ml.pdf

2) http://portal.hud.gov/hudportal/documents/huddoc?id=14-11ml.pdf#page=5

3) http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hcc/hecm

4) http://portal.hud.gov/hudportal/documents/huddoc?id=14-10ml.pdf

We offer mortgage branch opportunities in 47 states. We are looking to partner with seasoned branch managers who want to focus on production. We are not a net branch company. Nations Lending Corporation allows you to broker deals for which we have no products. Better than net branch opportunities, NLC offers all government sponsored products.

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