Texas Reverse Mortgage for Purchase Still a Long Way Off

texas reverse mortgageUsing a HECM for home purchase (Home Equity Conversion Mortgage) is available in 49 states, but not in Texas. Although FHA insured HECM reverse mortgages have been offered since 1989, it wasn’t until 1999 that Texas finally allowed its residents to take advantage of this type of home equity loan.

Once again, Texas lags behind all the rest of the states to allow HECM for Purchase loans, which were introduced in late 2008 and adopted throughout the U.S. except for the Lone Star state.

So why Doesn’t Texas Allow HECM for Purchase and why did they wait so long to finally allow standard HECM reverse mortgages to be originated in the state?

The answer is; It’s all about the Texas Constitution and protections regarding homestead laws. Texas will require a constitutional amendment before it will be legal for residents to get a HECM for purchase loan. The same was the case in 1999 when Texas finally made it legal for residents to obtain a standard HECM reverse mortgage, by passing a Constitutional amendment.

As with most bureaucratic procedures, progress on passing such an amendment will be long and slow. It is anticipated that it will be late 2013 if and when HECM for Purchase loans are available in Texas. (A full 5 years after all the other states gave residents access to this loan product.)

Joint effort is being made to advance this legislation by the Texas Mortgage Bankers Association, and the National Reverse Mortgage Lenders Association. Until then, HECM for Home Purchase in Texas is not a choice for seniors wishing to relocate or downsize with the help of a reverse mortgage in that state.

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