The Federal Housing Administration has proposed a new rule to strengthen its Home Equity Conversion Mortgage Program by prioritizing the HECM lien above all others and establish a so-called "super lien," reports HousingWire staffer Kelsey Ramirez.

In order for a HECM to be eligible for loan assignment, the HECM mortgage must be in lien status prior to homeowners association and condo association liens, the proposal states.

“We’ve gone to great lengths to protect seniors and ensure they can remain in their homes where they’ve raised families and where they hope to live out their days,” said Ed Golding, HUD principal deputy assistant secretary for housing.

“As we grow older as a nation, we have a responsibility to ensure reverse mortgages remain a safe, secure, and sustainable financial option for future generations of senior homeowners,” Golding said.

The proposed rule aims to reinforce reforms from the past two years as well as add new ones for consumer protection.

Here are the changes the proposition contains:

  • Make certain required HECM counseling occurs before a mortgage contract is signed
  • Require lenders to fully disclose all HECM loan features
  • Cap lifetime interest rate increases on HECM Adjustable Rate Mortgages to 5%
  • Reduce the cap on annual interest rate increases on HECM ARMs 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 the mortgage contract is terminated
  • Include utility payments in the property charge assessment
  • Create a “cash for keys” program to encourage borrowers to complete a deed-in-lieu and gracefully exit the property versus enduring a lengthy foreclosure process
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