The Lender is responsible for determining the maximum Initial Disbursement Limit for Adjustable Interest Rate Home Equity Conversion Mortgages (HECM).
Lenders must monitor and track all disbursements that occur at loan closing and during the First 12-Month Disbursement Period to ensure the total amount of the disbursements does not exceed the maximum Initial Disbursement Limit or Principal Limit. Where a Borrower has a Servicing Fee Set-Aside, the disbursement of the fixed monthly servicing fee charges may exceed the Initial Disbursement Limit or First 12-Month Disbursement Period restrictions; however, in no event may it exceed the Principal Limit.
The Initial Disbursement Limit and First 12-Month Disbursement Period are applicable to payment plan changes that occur during the First 12-Month Disbursement Period.
LINE OF CREDIT
During the First 12-Month Disbursement Period, if a requested disbursement would exceed the Initial Disbursement Limit, the Lender may make a partial disbursement to the Borrower for the amount that will not exceed the limit. Once the First 12-Month Disbursement Period ends, the Borrower may request subsequent disbursements up to the available Principal Limit.
TENURE AND TERM PAYMENTS
Lenders must ensure Tenure and Term monthly payments made during the First 12-Month Disbursement Period do not exceed the Initial Disbursement Limit. Upon the expiration of the First 12-Month Disbursement Period, adjustments to Tenure and Term payments may be recalculated using the available Principal Limit by having the Borrower sign the appropriate paperwork to change the payment amount and/or payment option. If the Borrower makes a partial repayment of the principal balance (outstanding loan balance) during the First 12-Month Disbursement Period, the Lender must increase the amount of principal available to the Borrower by the amount applied toward the outstanding loan balance, up to an amount not to exceed the Initial Disbursement Limit, as applicable, and the Principal Limit.
If the Lender receives repayment from insurance or condemnation proceeds after restoration or repair of the damaged property, then the available Principal Limit and mortgage balance shall be reduced by the amount of such proceeds.
For more information see Mortgagee Letter 14-21 available at https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee