source:
  type: guide
  id: hud-4000-1-ii-b-hecm-refinance
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. HECM Refinance
    (04/29/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. HECM
    Refinance (04/29/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-b-hecm-refinance-full
  canonical_id: hud-4000-1-ii-b-hecm-refinance-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. HECM Refinance
    (04/29/2024)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. HECM
      Refinance (04/29/2024)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'b. HECM Refinance (04/29/2024) HECMs to be insured under the
      HECM Refinance program must be processed and underwritten in accordance with
      the requirements in Origination through Post- closing/Endorsement, except where
      noted otherwise in this section. i. Definition HECM-to-HECM Refinance (HECM
      Refinance) refers to a new HECM where the proceeds will be used to pay off the
      property indebtedness of the current HECM and any existing eligible lien. Original
      HECM refers to the first HECM that was endorsed by FHA. Mortgagee Optional Election
      (MOE) Assignment refers to an assignment option available to Mortgagees for
      cases where an FHA case number was assigned prior to August 4, 2014, and is
      associated with an Eligible Surviving NBS. ii. Standard The Borrower must pay
      off any existing non-HECM lien on the subject Property that cannot be subordinated
      to the first and second HECM liens, and costs associated with the refinance
      transaction. When the HECM is in a deferred Due and Payable status, due to the
      death of all Borrowers, and the Eligible Non-Borrowing Spouse (NBS) seeks to
      obtain a HECM as a Borrower on the Property serving as collateral for the existing
      HECM, the transaction cannot be originated as a HECM Refinance, but must be
      originated as a traditional transaction provided that all Borrower eligibility
      requirements are met. iii. Counseling Requirements Waiver of Counseling on HECM
      Refinances The Borrower and NBS may elect not to receive counseling in a HECM
      Refinance if the following conditions are met: (i) the original HECM was assigned
      a case number on or after August 4, 2014, and the Borrower and NBS, if applicable,
      received HECM counseling; or the original HECM was assigned a case number prior
      to August 4, 2014, and there is no NBS as determined by the MOE Assignment policies;
      (ii) the Borrower has received form HUD-92901, Home Equity Conversion Mortgage
      (HECM) Anti-Churning Disclosure. See HECM Anti-Churning Disclosure; (iii) the
      increase in the Borrower’s Principal Limit (block 2 of form HUD-92901) exceeds
      the total cost of the refinancing by an amount equal to five times the cost
      of the transaction (block 1 of form HUD-92901); and II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      8. Programs and Products - HECM Refinance (04/29/2024) Handbook 4000.1 750 Last
      Revised: 11/26/2025 (iv) the time between the date of closing on the original
      HECM (i.e., the first time the Borrower obtains an FHA-insured HECM) and the
      application for refinancing does not exceed five years, even if less than five
      years have passed since a previous refinancing. The five-year period in bullet
      (iv) above does not restart with each new refinance, even when the Borrower
      has received HECM counseling since the original HECM. Mortgagees are responsible
      for obtaining documentation to confirm the date of closing of the original HECM.
      iv. Processing of a HECM Refinance (A) Churning (1) Definition Churning refers
      to a practice whereby Mortgagees engage in multiple refinances to generate additional
      profit from fees and charges. The churned HECMs are not made in the interest
      of the Borrower and provide no financial benefit to the Borrower. (2) Standard
      The Mortgagee must provide the Borrower with a completed form HUD-92901, within
      three Days of taking initial loan application, disclosing: • their best estimate
      of the total cost of the mortgage transaction; • the increase or decrease in
      the Borrower’s Principal Limit; and • the amount of any additional HECM funds
      that will be available to the Borrower as a result of the refinancing. If the
      Principal Limit of the HECM Refinance is lower than the Borrower’s current Principal
      Limit, the change must be entered as a negative number. (3) Required Documentation
      HECM Anti-Churning Disclosure Confirm the original form HUD-92901 is signed
      and dated by the Borrower. The Settlement Statement or similar legal document
      must indicate that all existing mortgage liens have been fully satisfied or
      are subordinate to the first and second HECM liens. (B) Ordering a Case Number
      The Mortgagee must enter the FHA case number of the existing HECM being refinanced.
      FHAC will not issue a case number if the existing case number is II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 8. Programs and Products - HECM Refinance (04/29/2024) Handbook 4000.1
      751 Last Revised: 11/26/2025 “terminated” or Due and Payable. The Mortgagee
      must terminate the existing case number in HERMIT after closing and once the
      outstanding loan balance of the existing HECM is satisfied. v. Property Eligibility
      Condominium Refinances HECM Refinance transactions do not require Condominium
      Project Approval or Single- Unit Approval. If the Unit is in a Condominium Project
      that has an FHA Condo ID, the Mortgagee must enter the FHA Condo ID when the
      FHA case number is requested. vi. Allowable Mortgage Parameters (A) Reduction
      of Initial Mortgage Insurance Premium At least one Borrower from the original
      HECM must be a Borrower on the HECM Refinance for the transaction to be eligible
      for reduced Initial Mortgage Insurance Premium (IMIP). (B) Calculation of Initial
      Mortgage Insurance Premium Mortgagees must use the formula below to determine
      IMIP due (IMIPdue) to HUD: (1) IMIPnew = MCAnew × IMIP ratenew (2) IMIPold =
      MCAold × IMIP rateold or, if this HECM has previously been refinanced: IMIPold
      = MCAold × IMIP rateold −previous IMIP credit (3) IMIPlimit = [(MCAnew −MCAold)
      × 0.03] −IMIPold (4) IMIPdue = min x≥0 (IMIPlimit, IMIPnew) IMIPnew is calculated
      by multiplying the new IMIP rate by the new MCA of the property being refinanced.
      For HECMs being refinanced for the first time, IMIPold is calculated by multiplying
      the original IMIP rate by the original MCA of the property being refinanced.
      For HECMs previously refinanced, IMIPold is calculated by multiplying the prior
      IMIP rate by the prior MCA of the property being refinanced, then subtracting
      IMIP credit previously applied. IMIPlimit is calculated by multiplying 0.03
      by the difference between the new MCA and old MCA, then subtracting the value
      calculated for IMIPold. IMIPdue is the lesser of IMIPlimit or IMIPnew, but cannot
      be less than zero. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages'
  judgment: false
