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17. Section 255 Home Equity Conversion Mortgage (HECM)
Contents:
- a. Description of the Section 255 Program
- b. Section 255 Borrower and Property Eligibility Policy
- c. Section 255 Plan Payments and Interest Rates
- d. Section 255 MIP Payment
- e. Section 255 Refinancing Policy
Change Date
October 26, 2009
Back to top1.C.17.aa. Description of the Section 255 Program
The Section 255 HECM program insures lenders against loss on reverse mortgages, which convert equity into monthly income or lines of credit.
Reference: For complete Section 255 programmatic instructions, see HUD Handbook 4235.1
, Home Equity Conversion Mortgages.
1.C.17.bb. Section 255 Borrower and Property Eligibility Policy
Under Section 255
- borrowers must be 62 years of age or older, and must occupy the property as their primary residence (unless one of the borrower(s) is temporarily or permanently in a nursing home.
- one to four dwellings are eligible. However, the maximum claim amount can not exceed that of a one family dwelling.
1.C.17.cc. Section 255 Plan Payments and Interest Rates
Plans include line of credit and/or monthly payments for a term (fixed period) or tenure (life). Interest rates may be fixed or adjustable.
1.C.17.dd. Section 255 MIP Payment
The MIP is paid as
- two percent of the maximum claim amount prior to insurance endorsement, and
- a monthly MIP based on the outstanding balance thereafter.
1.C.17.ee. Section 255 Refinancing Policy
Refinancing is permitted on FHA/HECM loan to another FHA/HECM.
References: For additional information on Refinancing Existing Home Equity Conversion Mortgages, see
- ML 09-21
, and
- HUD 4235.1, Home Equity Conversion Mortgages.
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