www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

April 10, 1996
 
Mortgagee Letter 96-15
 
TO:  ALL APPROVED MORTGAGEES
 
SUBJECT:  Home Equity Conversion Mortgage (HECM) Insurance
            Program - Changes in Program Requirements
 
     The Department is pleased to announce that the President
signed Public Law 104-120 on March 28, 1996, amending Sections
255(d)(3) and (g) of the National Housing Act to implement
changes in the Home Equity Conversion Mortgage (HECM) Insurance
program.  The HECM program, commonly referred to as the FHA
Reverse Mortgage program, is designed to enable elderly
homeowners to convert the equity in their homes to monthly
streams of income and/or lines of credit.  The following changes,
which are effective immediately, will expand the program and make
it available to more elderly homeowners:
 
     1.  The mortgage insurance authority is extended to
         September 30, 2000.
 
     2.  The mortgage insurance authority is increased to a
              maximum of 50,000 units. (A total of 15,000 cases
have             closed as of February 1996.)
 
     3.  Property eligibility is expanded to include two- to
         four-family properties in which the mortgagor occupies
                one of the units.
 
     Note that the maximum claim amount on a two-, three-, or
four-unit property is the lesser of the appraised value of the
property or the maximum mortgage amount allowed under Section
203(b)(2) of the National Housing Act for a one-family
residential unit in the area.  The one-family limit is to be used
for the maximum claim calculation in order to minimize the
conversion of equity attributable to the income-producing portion
of the property.
 
     Please direct all questions regarding these changes to your
local HUD Office.
 
Sincerely,
 

Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner