The Federal Housing Administration is extending processing hours for reverse mortgages this weekend to accommodate a rush to get loans approved ahead of rule changes coming Oct. 2.
The FHA Connection system will be available until 10 p.m. Eastern on Saturday to accommodate the unusually high volume, according to the government agency, which insures the loans made through the Home Equity Conversion Mortgage program.
Borrowers want to get in the door before the FHA implements a change to the principal limit factors used as part of calculations that determine how much equity a borrower can withdraw. The FHA also is readjusting the pricing structure for mortgage insurance.
The changes are aimed at better managing the risk that proceeds don't reach the point where they outweigh the value of the property securing the loan, and the net effect is generally a reduction in the proceeds available from a reverse mortgage.
Among other things, the FHA is lowering the "floor" rate for principal calculations to 3% from 5%. Rates above the floor rate can factor into calculations that restrict the amount of proceeds available from a reverse mortgage.
The FHA also is reducing the annual mortgage insurance fee and converting other variable rate charges for mortgage insurance that rise with the loan amount to a flat 2% charge.
Only borrowers 62 and older are eligible for HECMs, which are aimed at allowing seniors to withdraw equity from their homes while still living in them, so long as the borrowers can adequately maintain their properties.