Notice2024-08819
Federal Housing Administration (FHA): Home Equity Conversion Mortgage (HECM) for Purchase-Acceptable Monetary Investment Funding Sources and Interested Party Contributions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 26, 2024
Issuing agencies
Housing and Urban Development Department
Abstract
On October 24, 2023, HUD published a Federal Register notice (October FR Notice) announcing and seeking public comment on changes to the Federal Housing Administration's (FHA) Home Equity Conversion Mortgage (HECM) for Purchase Program--Acceptable Monetary Investment Funding Sources and Interested Party Contributions requirements. The proposed changes from HUD's October FR Notice were included in an update to HUD's Single Family Housing Policy Handbook, which was published October 31, 2023, and becomes effective on April 29, 2024. After consideration of the public comments received in response to the notice of the proposed changes, FHA has decided not to implement some of the changes proposed in the October FR Notice at this time. HUD will publish a Mortgagee Letter or update the Single Family Housing Policy Handbook to align HUD's policy with this Federal Register notice. All other changes previously included in the Handbook will go into effect on April 29, 2024, as planned.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 82 (Friday, April 26, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 82 (Friday, April 26, 2024)]
[Notices]
[Pages 32455-32456]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08819]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6382-N-02]
Federal Housing Administration (FHA): Home Equity Conversion
Mortgage (HECM) for Purchase-Acceptable Monetary Investment Funding
Sources and Interested Party Contributions
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Department of Housing and Urban Development (HUD).
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: On October 24, 2023, HUD published a Federal Register notice
(October FR Notice) announcing and seeking public comment on changes to
the Federal Housing Administration's (FHA) Home Equity Conversion
Mortgage (HECM) for Purchase Program--Acceptable Monetary Investment
Funding Sources and Interested Party Contributions requirements. The
proposed changes from HUD's October FR Notice were included in an
update to HUD's Single Family Housing Policy Handbook, which was
published October 31, 2023, and becomes effective on April 29, 2024.
After consideration of the public comments received in response to the
notice of the proposed changes, FHA has decided not to implement some
of the changes proposed in the October FR Notice at this time. HUD will
publish a Mortgagee Letter or update the Single Family Housing Policy
Handbook to align HUD's policy with this Federal Register notice. All
other changes previously included in the Handbook will go into effect
on April 29, 2024, as planned.
FOR FURTHER INFORMATION CONTACT: Brian Faux, Director, Office of Single
Family Program Development, Office of Housing, Department of Housing
and Urban Development, 451 7th Street SW, Room 9266, Washington, DC
20410-9000, telephone number 202-402-2378 (this is not a toll-free
number); email address <a href="/cdn-cgi/l/email-protection#daa9bcbcbfbfbeb8bbb9b19ab2afbef4bdb5ac"><span class="__cf_email__" data-cfemail="91e2f7f7f4f4f5f3f0f2fad1f9e4f5bff6fee7">[email protected]</span></a>. HUD welcomes and is prepared
to receive calls from individuals who are deaf or hard of hearing, as
well as individuals with speech or communication disabilities. To learn
more about how to make an accessible telephone call, please visit:
<a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Public Comments in Response to HUD's October Federal Register Notice
HUD's regulations at 24 CFR 206.44(b)(4) and 206.44(c)(2) provide
the FHA Commissioner authority to permit additional funding sources for
a borrower's monetary investment and interested party contributions for
HECM for Purchase transactions through notice in the Federal Register.
HUD relied on these authorities in making the proposed changes
described in HUD's October FR Notice published on October 24, 2023, at
88 FR 73040. The changes proposed in that October FR Notice also were
prospectively included in an update to HUD's Single Family Housing
Policy Handbook, published October 31, 2023, and becoming effective on
April 29, 2024.
FHA received two public comments in response to the October FR
Notice. One commenter was broadly supportive of the proposed changes to
the HECM for Purchase program. The commenter supported HUD's effort to
align the HECM for Purchase program with FHA's
[[Page 32456]]
forward mortgage programs by permitting the interested party
contributions explained in HUD's October FR Notice up to six percent of
the sales price. The commenter stated that these changes would help
more seniors qualify for and receive the benefits of the HECM for
Purchase program, especially in downsizing or otherwise changing the
size of their current homes before and during retirement. The commenter
concluded that the changes would improve and strengthen seniors'
financial status.
The other commenter raised significant concerns about allowing HECM
for Purchase borrowers to use lender credits, including premium
pricing, to satisfy the monetary investment requirement for a HECM for
Purchase. The commenter noted that, because HECMs are negative
amortization loans where the loan balance increases over time and
interest costs are added to the loan balance each month, accepting a
higher interest rate in return for a credit at closing would be very
costly for the borrower. The use of premium pricing may result in HECM
for Purchase borrowers being steered into more expensive products that
do not meet their long-term financial needs.
The commenter further noted that HECM for Purchase borrowers are
not likely to understand the true, long-term cost of the higher
interest rate nor are they likely to receive a credit at closing that
will fully compensate them for paying the higher interest rate because
the termination date of a HECM loan is unknown at the time of
origination, so the cost calculation can only be an estimate.
Additionally, in light of recent enforcement actions by state
authorities against mortgage lenders in the forward mortgage market
that failed to refund surplus lender credits to borrowers, the
commenter also raised concerns that HECM for Purchase borrowers may not
receive the full benefit of premium pricing credits.
Finally, the commenter disagreed that FHA should allow mortgagees
and third-party originators (TPOs) to contribute to closing costs. The
commenter noted that allowing mortgagees and TPOs to contribute toward
closing costs would increase the chances of undue influence, fraud, and
unaffordable loans for HECM for Purchase borrowers.
II. This Notice
HUD has carefully considered the comments received and has
determined that the potential harms to borrowers are significant enough
that it would be imprudent to make these changes at this time. Thus,
pursuant to the abovementioned authorities, HUD will remove the
following changes from HUD's Single Family Housing Policy Handbook
4000.1: (1) permitting premium pricing as an additional funding source
used to satisfy a HECM for Purchase borrower's monetary investment; (2)
including discount points in the definition of ``interested party
contribution''; (3) permitting interested party payment for permanent
and temporary interest rate buydowns as an interested party
contribution; (4) allowing mortgagees and third parties to make any
interested party contributions; and (5) allowing discount points and
interest rate buydowns as permissible closing costs for HECM for
Purchase transactions. Removing these changes means that the use of
premium pricing to help satisfy the borrower's monetary investment and
including discount points and permanent and temporary interest rate
buydowns as interested party contributions for a HECM for Purchase will
not be permissible, that mortgagees and third party originators (TPOs)
will be prohibited from making interested party contributions, and that
discount points and interest rate buydowns as permissible closing costs
will not be allowed after the effective date of HUD's Mortgagee Letter
or update to the Single Family Housing Policy Handbook.
Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-08819 Filed 4-25-24; 8:45 am]
BILLING CODE 4210-67-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 26, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.