Page 4 - AAG140_Evolution of Home Equity Brochure

2015 FINANCIAL ASSESSMENT: To reduce
borrower defaults, HUD implements
Financial Assessment, requiring lenders to
conduct a thorough analysis of borrowers’
income sources and credit history to
ensure they can meet the loan’s ongoing
obligations, such as the upkeep of the
property and payment of property taxes and
homeowners insurance. HUD also clarifies
the 2014 rules that allow non-borrowing
spouses to stay in the home after the Improving with Age
borrower dies or leaves the home.

What started as an idea or an experiment 30
2016 The FHA insures its years ago, and then became a demonstration

1,000,000th HECM that proved itself to Congress and the American
people, has since launched into a powerful and
useful financial instrument for tens of thousands
2017 THREE ESSENTIAL INNOVATIONS ARE of seniors seeking a responsible way to tap into
IMPLEMENTED TO STRENGTHEN THE LOAN: a portion of their home equity, which has now

New Upfront Insurance Premiums: The reached over $7 trillion.
new rate of 2% is an increase from 0.5
% for borrowers who took 60% or less The HECM has continued to evolve and improve,
of their loan proceeds upfront and and while it won’t be the financial solution for
a decrease from 2.5% for borrowers every senior who wants to increase their cash flow
who took more than 60% of their loan or simply have more money for their retirement—
proceeds upfront. supplementing an income stream such as Social
Security or a retirement plan—it should be part of

Annual Insurance Premiums: The new
rate of 0.5% is a decrease from 1.25%. every financial planning discussion.

Principal Limit Factors: The factors,
based primarily on age and prevailing
market interest rates, were adjusted,
leaving borrowers with more home
equity but fewer loan proceeds. These
adjustments further protect borrowers,
lenders and the sustainability of the
FHA’s insurance fund.

2018 SECOND APPRAISALS: Lenders are
required to provide a second independent
property appraisal in cases where the
FHA determines there may be inflated
property valuations. This new action further
strengthens the financial foundation of the
FHA’s reverse mortgage program, which is
contingent upon an accurate determination
of the value and condition of the borrower’s
property being used as collateral for the
loan.