This info has been sent from a local Mortgage Broker and is valuable to clients who are considering reverse mortgages.
Oct 1st : “Means Testing” for Reverse Mortgages Begins
Reverse Mortgage Info for Seniors
President Obama has signed legislation granting HUD the authority to make “reverse mortgage’ (HECM) program changes via a mortgagee letter,rather than going through a lengthy rulemaking process.
According to the Washington Post the changes appear to be scheduled for Oct 1st 2013.
The changes will greatly reduce access for seniors to the equity of their home.
If you clients family or friends considering a reverse mortgage, have them begin now as there is a 5 to 7 day lead time for counseling and application with another 5-7 days for the appraisal process.
Proposed changes include:
a) Limiting the “upfront draw” (i.e., the amount of funds available to the borrower in a lump sum).
b) Establishing tax and insurance impounds.
c) Minimum credit scores
d) Residual income and cash-flow analysis
“Residual income” is the amount of money left over each month after deducting a borrower’s housing expenses and installment debt from gross monthly income.
The test will certainly be modeled after the VA guidelines and which has additional criteria:
1) the number of household members
2) where the property is located
3) monthly debt service obligations
4) size of household
The major problem facing the program: a 10% default rate resulting from the borrower’s non-payment of property taxes, HOA and insurance.
The National Council on Aging and AARP spoke in support of the changes, noting the importance of
funding and resources.
Sen. Robert Menendez (D-New Jersey) and Jerry Moran (R-Kansas) are the two U.S. Senators heading up
For expert advice on reverse mortgages contact: christine beard for referral info 650 888 2806
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