source:
  type: guide
  id: hud-4000-1-iii-h-interest-rate-changes-for-adjustable-rate-hecms
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Interest
    Rate Changes for Adjustable Rate HECMs (04/29/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Interest
    Rate Changes for Adjustable Rate HECMs (04/29/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-h-interest-rate-changes-for-adjustable-rate-hecms-full
  canonical_id: hud-4000-1-iii-h-interest-rate-changes-for-adjustable-rate-hecms-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Interest
    Rate Changes for Adjustable Rate HECMs (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 III — h. Interest
      Rate Changes for Adjustable Rate HECMs (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: 'h. Interest Rate Changes for Adjustable Rate HECMs (04/29/2024)
      i. Definition Adjustable Rate HECMs refer to HECMs for which the interest rate
      will be adjusted periodically (monthly or annually) based on the Borrower’s
      election at closing. ii. Determining Periodic Adjustments to the Note Interest
      Rate When determining the Note interest rate and subsequent rate adjustments,
      the Mortgagee must use an index type approved by the Secretary. The margin is
      the same margin used to determine the initial Note interest rate and the periodic
      adjustments to the Note interest rate. When adjusting the rate for the Constant
      Maturity Treasury (CMT) Index, the Mortgagee must: • use the one-month or one-year
      CMT rate in effect 30 Days before the change date; and • provide the Borrower
      with a Notice of Interest Rate Change at least 25 Days before an adjustment
      to the interest rate. When adjusting the rate for the Standard Overnight Financing
      Rate (SOFR) Index, the Mortgagee must: • use the 30-day average SOFR rate in
      effect 30 Days before the change date; and • provide the Borrower with a Notice
      of Interest Rate Change at least 25 Days before an adjustment to the interest
      rate. iii. Notice of Rate Change The Notice of Interest Rate Change must advise
      the Borrower of the following: • the new HECM interest rate; • the current index
      value; and • the publication date of the index. iv. Required Documentation The
      Mortgagee must retain in the Servicing File: • supporting documentation of the
      interest rate used in the adjustment; and • a copy of the Notice of Interest
      Rate Change sent to the Borrower. III. SERVICING AND LOSS MITIGATION B. Title
      II Insured Housing Programs Reverse Mortgages 1. Servicing of FHA-Insured HECMs
      Handbook 4000.1 1453 Last Revised: 11/26/2025'
  judgment: false
