Refinancing �searchse About searche Use m Use Szh Refinancing wsearch 1 Rm Legal i Remortgage e Remortgagerefinancing e Remortgagerefinancing .c Www mr Use g Www gesearcheisearchasearchcd35+cc%BF%AA%BD%B1%BD%E1%B9%FBn Refinancing Terms e Terms a Www Www 0hsearch�searchesearchrsearchh            This information is needed to properly calculate the upfront premium.  In addition, the input field for the “Initial Advance” (formerly the Initial Draw field) requires the originating mortgagee to input the initial advance plus the funds to payoff the outstanding HECM.

                                                                                                                         Modified to Change Principal Limit Factor

The revised software also restricts the principal limit factor so that it is to be set no higher than the factor corresponding to the age of the youngest borrower and an expected rate of 5.5 percent.  The Department’s Handbook 4235.1 Rev-1, at paragraph 1-4, page 1-2, states that “The principal limit at origination is based on the age of the youngest borrower, the expected average       

mortgage interest rate, and the maximum claim amount.  Expected Average Mortgage Interest Rate (“expected rate”) . . . is fixed throughout the life of the loan and is used to determine payments to the borrower.  For a fixed rate loan, the expected rate is the fixed interest rate.  For an adjustable rate

loan, the expected rate is the sum of the lender’s margin and the U.S. Treasury Securities rate adjusted to a constant maturity of 10 years.” 

The revised software does not affect the expected rate, but rather it restricts the principal limit factors on those loans with expected rates of less than 5.5 percent to those factors, which would result if the expected rates were 5.5 percent.  FHA’s actuarial pricing model that produced the HECM principal limit factors produces unrealistically high factors with expected rates below 5.5 percent due to interactions with the model’s other pricing assumptions.  Without this change, HECM loans written at expected rates below 5.5 percent could produce inordinate losses for the FHA-insurance fund.  Therefore, this change is necessary to ensure the continued solvency of the FHA-insurance fund.

If you have never installed the HECM software, it can be downloaded from offices/hsg/sfh/hecm/hecminst.cfm.

If you have installed the software, the upgrade can be downloaded from pub/chums/hecm_upgrade.html.

Information Collection Requirements

The information collection requirements referred to in this Mortgagee Letter have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).  The OMB number issued for this requirement is OMB 2502- 0546.

If you have any questions about this Mortgagee Letter, please contact your local Homeownership Center in Atlanta (888) 696-4687, Philadelphia (800) 440-8647, Santa Ana

(888) 827-5605, or Denver (800) 543-9378 (these are all toll free numbers.)

                                                                        Sincerely,

                                                                        John C. Weicher

                                                                        Assistant Secretary for Housing-

    Federal Housing Commissioner

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3. New HUD Rule Allows Reverse Mortgages For Home Purchase
4. 2009 Reverse Mortgage & HECM Limits
5. The House’s Proposal Concerning Reverse Mortgages

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