FHA Reverse Mortgage Policy Changes Nearing
The Daily Transcript -- Reverse mortgages are causing trouble for the Federal Housing Administration, which could result in new policies going into effect in the next couple months.
Carol Galante, commissioner and acting assistant secretary for housing, wrote in a letter to U.S. Sen. Bob Corker four policies to help correct structural problems in FHA’s Home Equity Conversion Mortgage (HECM) program. Those policy recommendations include: requiring borrowers with credit scores below 620 to have a maximum debt-to-income ratio no greater than 43 percent to be approved through FHA’s TOTAL Scorecard; a moratorium on the full-draw HECM Reverse Mortgage, which would result in “the immediate cessation of the use of the Standard Fixed Rate HECM product"; lowering the maximum loan-to-value ratio on loans above $625,500 to 95 percent from 96.5 percent, raising the down payment from 3.5 percent to 5 percent . . . An attempt to control fees and penalties could be good in terms of trying to “prevent some consumer exploitation,” said Norm Miller, professor at the Burnham-Moores Center for Real Estate at the University of San Diego. (Full Story)