HUD is making reverse mortgage guideline changes coming in October of 2013. This was inevitable since the program has shown its flaws from a solvency standpoint. The reverse mortgage product has been such a valuable asset to the financial needs of seniors the age of 62 and older. The problem with the reverse mortgage program is the default rate on the loan is high because of financial missteps by HUD that can be changed very easily, which will make the program strong once again.The House and Senate has given the authority for the U.S. Housing and Urban Development(HUD) to make changes to the reverse mortgage program as they see fit. The problem is that some of these changes could leave some seniors without the this financial option, if they need it. The reason why Congress gave HUD this authority is because normally it takes roughly 2 to 3 years for any rules and regulations to get passed by Congress for any program like this. In 2 – 3 years, the reverse mortgage program may no longer be solvent and HUD would of had to kill the program. Giving HUD the reigns will allow them to keep the program solvent for years to come, but it will come at a price.
Some of the changes that HUD is looking to make is to combine the two types of reverse mortgage products together. Currently, the two products available are the HECM Standard andHECM Saver. The Home Equity Conversion Mortgage (HECM) Standard allows for the maximum cash-out, but comes with a higher FHA fee, while the HECM Saver allows for a minimal FHA fee, but usually comes with about 10% – 12% less cash-out than the HECM Standard. Of course, HUD has not made any official announcements yet as to what the combined product limit will be.
Another change will be the escrow holdback for the property taxes and hazard insurance on the home. The main reason why almost 1 out of 10 reverse mortgage loans are in default is because the homeowners are responsible for paying their own property taxes and insurance, but are failing to do so, so those homes are going into foreclosure. HUD essentially wants to evaluate the borrowers financial ability to pay on the property taxes and insurance by looking at their credit history. And depending on how good or bad their credit is, will determine how much will be funded into that escrow account. So if the borrower fails to meet their financial obligations by not paying on the taxes and insurance then the money will come out of the escrow account to pay for it. This should cut down on the amount of defaults dramatically.
Other changes may be coming soon, but these are ones that have been rumored coming out of HUD recently. As long as you start the application process before Oct. 1st, you can take advantage of the current guidelines today.
Please fill out the contact form at the right or by clicking here and have a qualified representative contact you!
Reverse Mortgage Guideline Changes Coming in October of 2013
![Reverse Mortgage Guideline Changes Coming in October of 2013]()
Reviewed by Merlyn Rosell
Published :
Rating : 4.5
Published :
Rating : 4.5