Apr 1, 2013

Federally insured reverse mortgage rules are getting a makeover.

If you are considering applying for a reverse mortgage, take note: The Federal Housing Authority has made changes to its Home Equity Conversion Mortgage program (HECM) effective April 1, 2013. 

Private lenders offer reverse mortgages, but almost all reverse mortgages are federally insured by HECM. Seniors must be age 62 or older and own their own homes to qualify for a reverse mortgage. The cash can help seniors with living expenses, payment of an existing mortgage or other debts, etc. Some of my clients have used reverse mortgage money to pay the premiums on long-term care insurance.

Starting April 1, the fixed rate HECM Standard mortgage will be discontinued. The program is being suspended because of the increasing number of borrowers who are unable to keep up with the required property taxes and insurance payments, sending a record percentage of loans into default. According to a Feb 2013 report to the House Financial Services Committee, projected losses for the nation's reverse mortgage program stood at $2.8 billion as of 2012.

Starting April 1, seniors who want to tap their home's equity using a reverse mortgage and who desire the predictability of a fixed rate loan must apply for a HECM Fixed Rate Saver Mortgage. This more conservative program provides a smaller payout from the borrower's home equity, although the up-front costs are lower. The Upfront Mortgage Insurance Premium is .01% of the lesser of the appraised value or current $625,000 lending limit.  

Seniors will see see more changes in the near future as the Department of Housing and Urban Development continues stabilizing the HECM program. Among the anticipated modifications: providing administrators of estates with incentives to sell the property of a deceased borrower, rather than convey the property to the Federal Housing Authority which must then shoulder the expense of liquidating the property. Another slated change: more intensive counseling of prospective borrowers, to ensure that a reverse mortgage is truly suitable for their situation.

If you own your own home, are at least age 62 and want to explore how a reverse mortgage may benefit you,  contact usWe can refer you to a reputable financial professional as well as advise you about how a reverse mortgage can be coordinated with your Florida estate planning. Reverse mortgages can be useful tools, but their complexity requires a thorough analysis before you take the plunge.


Read more about the changes to the federal HECM program here.

Read the National Council on Aging's 2013 booklet on reverse mortgage basics.

6 comments:

Sara said...

Reverse mortgage have been a great help for the senior citizens for quite a long time now. It is a great source of income for the senior citizens when they are unable to earn for themselves. Apart from that reverse home loans have even helped senior citizens to buy a new home for themselves. Thus, the elderly citizens won’t have to take help of anyone during the golden years of their life. In such a situation, reducing the payout can be of problem to many senior citizens. It may thus have a negative effect on the popularity of the reverse home loan program.

Anonymous said...

The interest rates and fees are all determined based upon home value. Senors are flocking to learn about HECM programs

Tudo Bem said...

Thanks for making this update. New rules and reverse mortgage are closely associated with each other. So make sure to check the rules and upcoming updates on Reverse Mortgage when applying for a loan after the end of the month.
Rules for a reverse mortgage

Nancy Adkins said...

The Florida reverse mortgage is an alternative of the equity release scheme that has been specifically devised for the retirees. It helps the retired individual to obtain money in lieu of the property owned.

Lance Cono said...

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Andrew Kleinmann said...

This is why many finding a good elder law attorney is critical for a reverse mortgage in Florida. Getting unbiased advice from an unaffiliated 3rd party is critical. In the right circumstances, this financial product could help some seniors but other times, it is simply not worth it. It all depends on the individuals circumstances. Also, I see many are confused with the differences between a reverse mortgage broker & reverse mortgage lender. You can get more information here: http://www.shopreversemortgages.com/florida/

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