Announcement on Fixed Rate HECM Reverse Mortgage Products
Reverse Mortgage News update to previous blog post (below)
Below are highlights from the Ginnie Mae All Participant Memorandum that was published yesterday, Monday, April 1st. In summary, Ginnie Mae will prohibit the inclusion of the new Fixed Rate programs that have any future advances after the initial lump sum disbursement.
· Ginnie Mae will prohibit the inclusion of fixed rate HECM loans where the borrower may choose a payment plan option that provides for future loan advances against the principal limit to be disbursed to the borrower.
· The origination of HECM loans in which servicers are committed to advancing future funds at a fixed interest rate gives rise to the risk that such advances will become uneconomic should interest rates rise from the time of origination. The impact of negative spreads between a fixed note rate and future prevailing rates could be exacerbated in such loans, and endanger the servicers' capacity to meet their HMBS obligations, which require the Issuer to maintain the capacity to advance funds as required under the HMBS program.
· Moreover, Ginnie Mae will monitor Issuers who retain such loans outside of Ginnie Mae pools, to the extent that interest rate risk could impact the issuers' capacity to meet their obligations for pools backing Ginnie Mae-guaranteed securities.
· Effective for HMBS securities issued on or after June 1, 2014, Ginnie Mae will not permit fixed rate HECM loans originated without the Single Disbursement Lump Sum payment plan option to be included in Ginnie Mae-guaranteed HMBS securities.
For the full announcement click on the following link:
Introducing The Flexible Fixed HECM Reverse Mortgage
In the past, if you wanted a fixed rate reverse mortgage, you had to take all of the available funds as a lump sum of cash.
With the introduction of The Flexible Fixed HECM, reverse mortgage borrowers can have the agility of multiple payment options with the stability of a fixed rate.
The payment type, whether a monthly tenure payment that continues until the last borrower leaves the home permanently, a term payment for a specific time period or line of credit for access to funds at any time will accumulate interest at a fixed interest rate.
The new Flexible Fixed HECM for senior homeowners, age 62 and older details are:
· Must receive a lump sum initial disbursement at closing (not to exceed the greater of 60% of principal limit or mandatory obligations which are mortgage and lien payoffs plus 10% of principal limit)
· Will have full access to their remaining funds after 12 months, in any payment plan choosen— as a line of credit, monthly advances (term or tenure), lump sum, or a combination of these
· Will have the security of a competitive fixed interest rate throughout the life of the loan
This reverse mortgage option is a great tool for paying off an existing mortgage or other debt and have no monthly mortgage payments to make to improve cash flow and keep more money for living expenses. More funds will not be available until one year later when the option of receiving a steady stream of monthly funds, or keep the remaining funds as a line of credit and can tap as needed.
For an analysis of how the Flexible Fixed HECM may work for you, click here.
Currently, this option is not available in Nevada.
By: Maggie O'Connell