New Policy Changes Regarding Reverse Mortgages in 2014
On September 20th 2013, Housing and Urban Development (HUD) released updated policies regarding Home Equity Conversion Mortgage (HECM) program requirements for Reverse Mortgages in 2014.
The goal of these changes is to provide homeowners with a safer and stronger product as well as minimizing homeowner risk.
What do these changes mean for me?
- Homeowners will be allowed to withdraw up to a certain percentage of their loan amount within the first 12 months, ensuring that there will be a reserve of equity left in the home. The remaining equity can be left to appreciate, or the mortgagor can tap into the line of credit one year later.
- The fixed rate is still offered under the Single Disbursement Lump Sum Payment Option.
- Initial Mortgage Insurance Premiums (MIP) for many homeowners may be lower.
- Fees and costs may be lower in obtaining a reverse mortgage for many homeowners.
Although the exact date has not yet been released, two additional policies are scheduled to go into effect in the first quarter of 2014.
- The Financial Assessment Requirements
- Funding Requirements for Payment of Property Charges
What homeowners need to know about these changes:
- The Financial Assessment policy may have an effect on a homeowner’s ability to qualify for a reverse mortgage.
- The Financial Assessment Requirements will evaluate a potential homeowner’s capability and willingness to fulfill the financial obligations to comply with the program’s requirements. This will include analyzing credit history and cash flow/residual income, as well as verifying credit, income, assets and property charges. In the past, these had no bearings on a homeowner’s eligibility but will become qualifying factors after the implementation date.
- If the assessment determines that the homeowner may not be able to meet future financial responsibilities such as property taxes and hazard insurance payments, the lender holds the authority to set-aside a certain amount of funds from HECM monthly payments or line of credit when due.
These policies are intended to protect reverse mortgage homeowners by improving the program and making it more sustainable.
Contact an AAG Reverse Mortgage Professional if you have any questions or concerns regarding these changes.