An older borrower’s view of a reverse mortgage need not stop at the products one lender sells. HUD’s HECM final rule, published January 19, 2017, required lenders to explain all products, features and options insured by the Federal Housing Administration, irrespective of their own offerings. The publication scheduled September 19 effectiveness; this was not a claim that every new provision already applied in January. [2017-01044]

That information requirement had a practical boundary. Explaining an option did not oblige the same lender to supply it or establish a borrower’s eligibility. HUD also described an existing financial assessment examining credit history, cash flow and residual income before approval. Depending on that assessment, funds could be set aside for certain property charges; a required set-aside on a fixed-rate HECM had to be fully funded. [2017-01044]

Interest-rate protections followed a different path. The May 2016 proposal contemplated one-percentage-point annual adjustments and five-point lifetime adjustments for annually adjustable loans, plus a five-point lifetime limit for monthly adjustable loans. The January final deferred a decision on those changes. Reading the proposal as a completed protection would give borrowers the wrong account of what HUD had settled. [2016-11631][2017-01044]

For families comparing options, the useful distinction is between information, qualification and contractual limits. The two HUD documents explain those different questions within one rulemaking chain. They do not show that borrowers avoided foreclosure or obtained cheaper loans. Broader disclosure can be assessed as a tool for informed choice without treating an available explanation as a guaranteed offer. [2016-11631][2017-01044]

Source documents

  1. Federal Housing Administration: Strengthening the Home Equity Conversion Mortgage Programhttps://www.govinfo.gov/content/pkg/FR-2017-01-19/html/2017-01044.htm
  2. Federal Housing Administration (FHA): Strengthening the Home Equity Conversion Mortgage Programhttps://www.govinfo.gov/content/pkg/FR-2016-05-19/html/2016-11631.htm