The Department of Housing and Urban Development added a last-minute restriction to a previously proposed policy that aims to increase older homebuyers’ ability to tap home equity.
The Federal Housing Administration has cut lenders, third-party originators and any “premium pricing” from the newly expanded list of allowable interested-party contributions for Home Equity Conversion Mortgages used to buy homes.
Some other aspects of the proposed rule, which allows homebuyers to use additional funding sources to qualify for a HECM, were left unchanged.
“FHA will move forward with its proposal that permits contributions by the property seller, real estate agent, builder, or developer to HECM for Purchase borrowers’ closing costs,” the administration said in an information bulletin.
Consumer advocates welcomed the new restrictions as a means of ensuring lower financing costs for borrowers ages 62 and up who are eligible for the loans.
“HUD’s policy announcement today will remove the risk that these older homeowners will be up-charged on their interest rate,” said Sarah Mancini, co-director of advocacy at the National Consumer Law Center, in a press release.
The National Reverse Mortgage Lenders Association responded to the new restrictions with a statement indicating that it would be looking into ways to resolve any related borrower concerns that led to the change.
NRMLA was “disappointed that HUD has had to pull back on certain H4P features, which would have better aligned the product with the way things are done on the forward side of the mortgage business,” President Steve Irwin said in an email.
“We also understand that we must ensure there is clarity for the consumer in how these product features work, and the consumer impacts of these features. NRMLA will devote itself to identifying any concerns regarding these features and work to resolve those concerns,” he added.
