HUD Clarifies and Updates Reverse Mortgage Rules

In a Mortgagee Letter issued Monday, the U.S. Department of Housing and Urban Development (HUD) has revised changes to the home equity conversion mortgage (HECM) program requirements, some of which will take effect today.

Mortgagee Letter 2014-22 consolidates and revises policy requirements issued under two mortgagee letters from 2013, Mortgagee letters 2013-27 and 2013-33. It also revises some of the requirements outlined in Mortgagee letter 2014-11, issued earlier this year, to clarify that a fixed-rate reverse mortgage borrower may be reimbursed for the costs of some materials under certain conditions when repairs must be completed after loan closing.  

“The Secretary has determined that the changes announced in this Mortgagee Letter are necessary to improve fiscal soundness and protect the viability of the HECM program,” the letter states. “These critical program changes will realign the HECM program with its original intent, and thereby aid in the restoration of the [Mutual Mortgage Insurance Fund] and help ensure the continued availability of this important program.”

Among other areas, the letter details changes to: reimbursement required for repairs completed by the mortgagor; initial disbursement limits; mandatory obligations for traditional and refinance transactions; credit standing and financial assessment requirements; unused life expectancy set-asides; and financial assessment and property charge funding requirements. 

In a separate letter, the department also released its long-awaited financial assessment for reverse mortgage borrowers Monday, which will take effect for all case numbers issued on or after March 2, 2015.

Access Mortgagee Letter 2014-21. Access the financial assessment. 

Written by Emily Study

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