The principal limit will be calculated in accordance with HECM regulations at 24 CFR 206.3, HUD Handbook 4235.1 REV-1, and applicable MLs. At closing, HECM mortgagors must provide a monetary investment which will be applied to satisfy the difference between the HECM principal limit and the sale price for the property, plus any HECM loan related fees that are not financed into the loan, minus the amount of the earnest deposit. HECM mortgagors may choose to provide a larger investment amount in order to retain a portion of the available HECM proceeds for future draws. A set of Required Investment Examples is contained in the attachment to this ML to assist lenders with the calculation.
HECM mortgagors must use cash on hand or cash from the sale or liquidation of the mortgagor’s assets for the required monetary investment. The monetary investment requirement can also be met by the use of approved funding sources as defined in HUD Handbook 4155.1
REV-5, section 2-10, with the exception of the following funding sources which be used:
Cash or its equivalent, in whole or in part, from the following parties, before, during or after loan closing:
The seller or any other person or entity that financially benefits from the transactions, or
Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in the previous bullet.