Reverse Mortgages: HECM to HECM Refinance

HECM to HECM Refinance

Refinancing an HECM with an HECM

The normal upfront Mortgage Insurance Premium (MIP) on an HECM is 2.0% of the maximum claim amount. (The maximum claim amount is the lesser of the home’s value or the County’s lending limit). If an HECM is being refinanced, HUD gives a credit for the upfront MIP paid on the existing loan.

For example, if the existing loan’s claim amount was $150,000, its original upfront MIP was $3,000. If the new loan’s claim amount is $200,000, normally upfront MIP would be $4,000, but, after the $3,000 credit from the existing loan, the new loan’s upfront MIP is reduced to $1,000.

According to Mortgagee Letter 2004-18, HUD will allow a borrower to opt out of the HECM Housing Counseling Requirement if all three of the following conditions are met:

1. The borrower has received the required HUD Anti-Churning Disclosure form,
2. The increase in the borrower ’s principal limit exceeds the total cost of the refinancing by an amount equal to five times the cost of the transaction, and
3. The time span between the closing date of the original HECM that is to be refinanced and the application date for the new HECM does not exceed five years, even if less than five years have passed since a previous refinancing.

To do an HECM refinance, you need to obtain the following information about the current (existing) HECM from your servicer: the original maximum claim amount, current principal limit, and current payoff amount (balance due).