NRMLA Advocates Reduced MIP In Place of PLF Haircut

In his testimony last week before the Subcommittee on Housing and Community Opportunity, NRMLA President Peter Bell proposed a restructuring of the mortgage insurance premium collected by the Federal Housing Administration on all Home Equity Conversion Mortgages and removing the 10 percent reduction in principal limit factors.

An informal analysis conducted by NRMLA and three of the most active HECM lenders found that 20% of borrowers (approximately 23,000 homeowners) who got reverse mortgages this year would not have qualified for a reverse mortgage after the PLF reduction was implemented because they would not received sufficient funds to pay off their existing mortgages.

“An alternative we recommend would be to adjust the mortgage insurance premium to generate more income to the FHA insurance fund,” Bell testified. “HUD could generate the income the program needs to operate, while reducing upfront costs, by restructuring the MIP with a lower front-end amount and a higher ongoing MIP. By reducing the up-front premium to 1% or less, while raising the ongoing premium an appropriate amount, the program can be operated on an easily-adjusted self-sustaining basis, senior homeowners would not have to experience any reduction in proceeds from a HECM, and up-front costs could be lowered—a winning combination for all.”

To read Bell’s complete testimony, please click here.