Standard Fixed Rate HECM Likely to Be Suspended

standard fixed rate hecmFederal Housing Administration’s Acting Assistant Secretary, Carol Galante, in a letter to Senator Bob Corker (R-TN) said FHA is willing to place a moratorium on offering the Standard Fixed Rate Reverse Mortgage loan as an option under the HECM menu of available loan choices. Her intention is to have this policy change in place by January 31, 2013.

As was pointed out in a recent independent audit of the FHA insurance fund’s net worth, the HECM program is responsible for $2.8 billion of the overall $16 billion shortfall in the fund. Galante’s letter states that “Eliminating the use of the Fixed Rate Standard program is an immediate stop gap measure” to decrease future risk to both FHA and borrowers.

She goes on to say, “FHA will also commence rulemaking to make several other important changes, including establishing formal guidelines for conducting financial assessments of borrowers and the creation of set-asides for payment of taxes and insurance.”

You can read the complete letter here.

As we have been pointing out over the last several months, if you have been considering applying for this type of home equity loan, you may find it beneficial to act quickly, before these changes are made. After the changes are implemented, loan amounts will be lower, and qualifying will be more difficult. Feel free to request a no obligation quote below.

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