Changes Coming for Reverse Mortgages

It appears to be eminent that the FHA insured HECM Reverse Mortgage program will undergo significant changes early in 2013. Changes to the current guidelines could result in some seniors not being able to qualify for the loan at all and in other cases, some borrowers being severely impacted by lower loan amounts.

A recent audit revealed that the overall FHA Insurance fund has a 16 Billion dollar shortfall or negative net worth, and that the HECM shortfall accounts for just under 2.8 Billion of that total. Consequently, FHA has asked Congress for the authority to make necessary changes to the HECM program to shore up the program to cover projected future losses.

Likely Changes

Anticipated changes include: hecm

1. Lower Loan Amounts

2. Financial Assessment of borrower’s ability to make future property tax and homeowner insurance payments.

3. Setting aside funds (from the loan proceeds) for future payment of taxes and insurance.

4. Restricting the initial draw of funds at time of closing to only the amount needed to cover mandatory obligations.

At the present time, none of the above changes have been made to the program, but most industry experts fully expect some version of the aforementioned to be implemented during the first quarter of 2013.

If you have been on the fence about whether or not to get a reverse mortgage, now could be an opportune time to investigate your options before more restrictive guidelines are implemented.

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