HUD Invites Comments on Fixed-Rate Reverse Mortgage Insurance Halt

Three weeks following its ruling to halt insurance of certain Home Equity Conversion Mortgages (HECMs) that allow future draws against the principal limit at a fixed-rate, the Department of Housing and Urban Development (HUD) is now inviting public commentary on the decision.

A notice published Thursday in the Federal Register encourages interested persons to submit comments, either electronically or via standard mail, to HUD regarding its announcement last month on HECM fixed-rate product variations.

Additionally, HUD urges those interested parties who wish to submit comments to explicitly refer to the docket number and title issued in the notice to receive consideration.

Via Mortgagee Letter 2014-11, issued June 18, HUD said that it will no longer insure newer HECM product variations that allow future fixed-rate draws against the principal limit, citing that these loans pose “new risks” to the financial soundness HECM program.

The ruling echoed a similar announcement from Ginnie Mae in April, which in an “All Participants Memorandum” (APM) called for the exclusion of these types of fixed-rate HECM products from securitized pools of mortgage-backed securities. 

“Therefore, to address the increased risk that would be borne by FHA and the Fund as a result of Ginne Mae’s APM, HUD issued Mortgagee Letter 2014-11, which requires all fixed interest rate HECMs to have the Single Disbursement Lump Sum payment option and prevents future draws to the mortgagor after closing,” states the notice in the Federal Register.

HUD will accept comments on the changes announced in Mortgagee Letter 2014-11 for a period of 30 days, and will consider these comments in its development of a final rule. 

View the notice in the Federal Register.

Written by Jason Oliva

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