Generation Mortgage recently published an alert stating that Fannie Mae announced a modification to their pricing policy for HECMs. Effective immediately, all HECM to HECM refinances are eligible to earn a premium, but lenders are still obligated to comply with all HUD regulations for HECM refinances.
Prior to this change, most lenders weren’t paying premiums for any HECM to HECM refinances that did not pass the 5:1 Anti-Churning test. For HECM refinances, HUD requires that lenders provide borrowers with its Anti Churning disclosure which is designed to:
prevent “churning,” an irresponsible lending practice whereby lenders engage in multiple refinancing to generate additional profit from loan fees and charges. The “churned” mortgages are not made in the interest of the borrower and provide no financial benefit to the borrower.
The alert from Generation does state its underwriters will continue to ask for detailed information from originators and borrowers should the anti churning ratio (5:1 Rule) not meet the rule as established by FHA.
At the end of the day, it sounds like Fannie Mae is letting HUD handle the task of holding lenders accountable. Financial Freedom made the same announcement earlier this week as well. I’d expect other lenders to follow suit.
