The


Federal
Housing
Administration
(FHA)
on
Wednesday
published
Mortgagee
Letter
(ML)

2024-18,
which
implements
updates
to
debenture
interest
rates
and
reimbursements
for
Home
Equity
Conversion
Mortgage
(HECM)
program
claims

proposed
in
July.
The
ML
goes
into
effect
on
Sept.
28.

Debenture
interest
refers
to
the
percentage
of
a
return
that
an
investor
would
receive
for
lending
money
through
a
debenture.
The
updated
rule
builds
upon
several
changes
that

FHA
made
to
the
HECM
program
on
Jan.
19,
2017,
which
went
into
effect
later
that
year.

“This
ML
updates
the
debenture
interest
rate
used
for
the
payment
of
debenture
interest
for
HECM
claims
and
establishes
a
process
for
adjusting
debenture
interest
for
claims
already
filed
on
HECMs
that
became
due
and
payable
on
or
after
Sept.
19,
2017,”
FHA
said
in
its
announcement.

There
are
three
core
provisions
in
the
ML,
including
a
modification
of
HECM
insurance
regulations
“by
defining
the
date
of
default
as
the
date
for
determining
the
debenture
interest
rate
on
loans
that
become
due
and
payable”
after
publication
of
the
ML.
The
rule
also
reaffirms
the
interest
rate
used
for
the
payment
of
debenture
interest
for
HECM
claims
to
align
with
the
January
2017
rule.

The
ML
also
adds
a
new
debenture
interest
rates
section
to
the
Single
Family
Housing
4000.1
Handbook,
and
it
“establishes
a
Debenture
Interest
Rate
Adjustment
(DIRA)
process
so
HECM
holders,
or
their
authorized
representative,
can
request
an
adjustment
to
the
debenture
interest
rate
used
to
calculate
payments
for
claims
filed
on
HECMs
that
became
due
and
payable
on
or
after
September
19,
2017,
and
filed
prior
to
September
28,
2024.”

This
DIRA
process
will
go
into
effect
on
Jan.
2,
2025,
and
will
be
available
through
July
1,
2025.
As
an
attachment
to
the
new
ML,
the


U.S.
Department
of
Housing
and
Urban
Development
(HUD)
added
a
DIRA
request
template
that
can
be
used
for
such
submissions.

“HUD
encourages
all
HECM
holders
to
thoroughly
analyze
their
portfolio
to
determine
which
HECM
claims
they
are
legally
entitled
to
include
in
a
DIRA
submission,
as
only
one
DIRA
and
one
corrective
DIRA
will
be
accepted
by
HUD,”
the
announcement
explained.

As
in
the
proposed
rule,
the
final
ML
also
includes
certain
changes
made
in
January
2024
to
the
Home
Equity
Reverse
Mortgage
Information
Technology
(HERMIT)
system.
The
FHA
has
since
determined
that
these
changes
have
created
a
“financial
hardship
to
mortgagees
that
hold
a
substantial
number
of
loans
that
were
already
in
default
at
that
time,”
according
to
the
ML.

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