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 Improving with Age
ensure they can meet the loan’s ongoing
obligations, such as the upkeep of the What started as an idea or an experiment 30
property and payment of property taxes years ago, and then became a demonstration
and homeowners insurance. HUD also that proved itself to Congress and the American
clarifies the 2014 rules that allow non-
borrowing spouses to stay in the home people, has since launched into a powerful
after the borrower dies or leaves the home. and useful financial instrument for tens of
thousands of seniors seeking a responsible
way to tap into a portion of their home equity,
2016 The FHA insures its which has now reached over $7 trillion.
1,000,000th HECM
The HECM has continued to evolve and
improve, and while it won’t be the financial
2017 THREE ESSENTIAL INNOVATIONS ARE solution for every senior who wants to increase
IMPLEMENTED TO STRENGTHEN THE LOAN: their cash flow or simply have more money for
New Upfront Insurance Premiums: The their retirement—supplementing an income
new rate of 2% is an increase from 0.5 stream such as Social Security or a retirement
% for borrowers who took 60% or less plan—it should be part of every financial
of their loan proceeds upfront and planning discussion.
a decrease from 2.5% for borrowers
who took more than 60% of their loan
proceeds upfront.

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