On May 19, 2016, the Federal Housing Administration (FHA) published a proposed rule concerning its Home Equity Conversion Mortgage (HECM) program, Strengthening the Home Equity Conversion Mortgage Program (FR-5353-P-01). The proposed rule would:
- Codify previously implemented requirements;
- Make certain that HECM counseling occurs before a mortgage contract is signed;
- Require lenders to fully disclose all HECM loan features;
- Cap lifetime interest rate increases on all adjustable rate HECM loans to 5%;
- Reduce the cap on annual interest rate increases on adjustable rate HECMs from 2% to 1%;
- Require lenders to pay mortgage insurance premiums until the HECM is paid in full, foreclosed on, or a deed-in-lieu is executed rather than until when the mortgage contract is terminated; and
- Create a "cash for keys" program to encourage borrowers to complete a deed-in-lieu transaction and gracefully exit the property versus enduring a lengthy foreclosure process.
Comments are due by July 18, 2016.