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FHA consolidates pricing options for HECM Standard with HECM Saver

The Federal Housing Administration announced Wednesday it is consolidating its Home Equity Conversion Mortgage (HECM) Standard and the HECM Saver initial mortgage insurance premium (MIP) and maximum principal limit factors for fixed interest rate mortgages.

A mortgagee letter dated Jan. 30 outlines the changes, which will be effective for all fixed-rate case numbers assigned on or after April 1, 2013.

The HECM Standard initial MIP option may only be used with adjustable interest rate mortgages, according to the letter. All fixed interest rate mortgages that were assigned a FHA case number on or before March 31, 2013 may be processed as either HECM Standard or HECM Saver as the initial MIP; but any fixed-rate HECM Standard mortgage must close on or before July 1, 2013.

For HECM Saver, the initial MIP will remain at 0.01 percent of the maximum claim amount. The annual MIP for HECM Saver will remain at an amount of 1.25 percent of the outstanding loan balance. The HECM Saver is available for: fixed interest rate mortgages, adjustable interest rate mortgages -- both monthly and annual, all interest rate indices, all HECM transaction types, and all five payment plans -- tenure, term, line of credit, modified tenure and term.

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