"New View opined that the upfront MIP equal to 2% of the home's value or the current loan limit, whichever is less is excessive and makes HECMs an expensive product. It noted that a borrower whose home value exceeds the 2026 loan limit of $1,249,125 would pay nearly $25,000 in upfront MIP, while a borrower who owns a $500,000 house would pay $10,000. For many borrowers, this is a material obstacle to overcome, and no doubt contributes to the low volume of HECM origination."
"New View's argument for a lower upfront premium is also tied to the health of the FHA's Mutual Mortgage Insurance (MMI) Fund. The fund is statutorily required to maintain capital reserves of 2%, but a report issued late last year showed the ratio topped 11%. New View added that the HECM financial assessment reduces risk to the FHA and makes a higher upfront MIP unnecessary. It pointed to FHA's data showing that annual MIP fees of 0.5% sufficiently cover losses tied to the HECM program."
Private-label reverse mortgages now account for about 40% of market activity. New View Advisors answered each of the 21 RFI questions and proposed reforms, some implementable immediately and others requiring a year or more. New View recommended lowering the HECM upfront mortgage insurance premium (MIP), currently 2% of the home's value or the loan limit, calling it excessive. A homeowner above the 2026 loan limit would pay nearly $25,000, while a $500,000 home incurs $10,000, creating a barrier and depressing HECM originations. The MMI Fund ratio exceeds the statutory 2% reserve, FHA data indicate annual MIP of 0.5% covers losses, and New View urged cutting the initial charge to about 1% and basing it on the initial principal limit.
Read at www.housingwire.com
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