HUD Recently released a Mortgagee Letter that effectively eliminated the Principal Limit Lock for HECM Fixed Rate Loans. The notice stated that the final note rate had to match the rate used to calculate the principal limit.
This means the amount of money available in a reverse mortgage could change from the time the application is made and the time the loan closed. This ONLY effects Fixed Rate HECM loans which are already offering less cash than the traditional HECMs.
I don't understand why lenders aren't hedging this paper and offering a true "Lock In" upfront like forward mortgages. Why rely on a principal limit lock would they could be offering a rate lock up front. I think this is a good example that the reverse mortgage industry still has some maturing to do. There was a time in Forward mortgages when rates could not be locked in advance of closing.
