Issue 41.13
For homeowners looking to the federal government’s reverse-mortgage program to supply lots of cash for their retirement years, here’s a heads-up: The pipeline just got narrower
Pressed by Congress to slash losses, the Federal Housing Administration (FHA) last week outlined steps designed to limit the maximum amounts that seniors can draw down on their homes and to make it tougher to qualify for a reverse mortgage.
Starting in January, applicants for FHA-backed reverse mortgages will for the first time have to qualify under comprehensive new “financial assessments” — covering credit history, household cash flow and debt levels — to make sure they have the “capacity and willingness” to meet their financial obligations under the terms of the loan
At the same time, they may also be required to set aside sizable portions of their drawdowns to handle property taxes and hazard insurance for years to come. As early as next month, some applicants will also be required to pay substantially higher FHA insurance premiums if they pull out hefty amounts of funds upfront at closing.
The FHA’s insured reverse-mortgage program, which is hawked aggressively by TV pitchmen including former Tennessee Sen. Fred Thompson, Henry “the Fonz” Winkler and Robert Wagner, dominates the field.
But losses to the FHA’s insurance funds caused by reverse mortgages have mounted and could trigger a nearly $1 billion bailout by the Treasury.
The FHA hopes to avoid that, however. The newly imposed eligibility and drawdown rules are intended to cut losses and help achieve greater financial stability for the program, according to FHA Commissioner Carol Galante.
Cristina Martin Firvida, director of financial security and consumer affairs for AARP, the seniors lobby, said while she understands that the FHA must cut losses, inevitably “the changes … will bar access to reverse mortgages for many.”
The entirety of the changes, though seemingly devastating, will enable this established financial option to continue to assist the senior consumer. Even after the adjustments to the calculating factors a home can be purchased using the HECM with under 50% money down and NO payments for life.
As a Lender we still feel there is a huge demand for the HECM and many seniors will still be able to take advantage of having no mortgage payments. The positive approach is just appreciating the continued availability of the loan product.
My name is Scott Gibson and I have been licensed and performing the H.E.C.M. for over 7 years. I have seen it evolve into what it is today and would love to educate you as well. 435-619-8080.